The authors present a theory of involuntary unemployment which explains why the unemployed workers ("outsiders" ) are unable or unwilling to find jobs even though they are prepared to work for less than the prevailing wages of incumbent workers ("in siders"). The outsiders do not underbid the...

In the traditional Keynesian and classical models, the transmission of product demand changes to the labor market generally involves wage-price sluggishness or countercyclical real wage movements. In practice, however, real wages are often acyclical or procyclical, and wages and prices are...

This paper suggests that a union's wage demands are not merely the outcome of maximizing the union's utility function subject to a labor-demand or minimum-profit constraint as the standard models of union behavior suggest, but tha t these wage demands also depend on the cost which the union can...

This paper explores a variety of government policies that can stimulate employment when unemployment is generated through conflicts of interest between insiders and outsiders. It also provides guidelines for identifying polices that may be ineffective. The authors show how supply-side policies...

This paper analyzes how firms can use job security as an incentive mechanism. The author examines how "macroeconomic job security" (measured by the reemployment probability) may affect productivity differently from "microeconomic job security" (measured by the probability of being retained). The...