In this paper we introduce efficiency wage relation in the benchmark model of DMP where worker’s efficiency depends on the wage rate and the labour market tightness. We also examine the parametric effects on the Nash-wage rate, market tightness and on the equilibrium unemployment rate. Our...

This paper introduces efficiency wage relation and assumes endogenous job destruction in the benchmark DMP model. A comparative static analysis has also been made which shows that most of the results obtained in the DMP model get altered in the extended model