Gautier, Pieter A; Teulings, Coen N; van Vuuren, Aico - C.E.P.R. Discussion Papers - 2006
We characterize the equilibrium of a search model with a continuum of job and worker types, wage bargaining, free entry of vacancies and on-the-job search. The decentralized economy with monopsonistic wage setting yields too many vacancies and hence too low unemployment compared to first best....