Document Type

Article

Publication Date

2022

DOI

10.1002/ise3.27

Publication Title

International Studies of Economics

Volume

17

Issue

3

Pages

296-310

Abstract

Technology variations among countries account for a significant part of their income differences. In this paper, a firm's technology choice is embedded in a search theoretic framework for unemployment. More advanced technology is assumed to have a higher setup cost, but it is more productive. The model is tractable and the following results are derived analytically. An increase in the unemployment benefit leads to an increase in the equilibrium wage rate, giving an incentive to firms to choose a more advanced technology. Thus, this result regarding unemployment insurance in models with wage posting carries through with Nash bargaining as well. As a consequence, the equilibrium unemployment rate increases. Furthermore, an increase in the bargaining power of workers increases the unemployment rate but has an ambiguous impact on the equilibrium level of technology and the wage rate. Finally, an increase in the exogenous job separation rate or the interest rate increases the unemployment rate and decreases the wage rate but does not affect the equilibrium level of technology.

Rights

© 2022 The Authors.

This is an open access article under the terms of the Creative Commons Attribution 4.0 International License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

ORCID

0000-0002-1929-3347 (Zhou)

Original Publication Citation

Angyridis, C., & Zhou, H. (2022). Search, technology choice, and unemployment. International Studies of Economics, 17(3), 296-310. https://doi.org/10.1002/ise3.27

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