The One - Sided Search Model Flashcards
What does the One - Sided Model represent?
It focuses on the behaviour of the unemployed. It illustrates the point at which a wage (W) is accepted by an unemployed worker to find a job. If W is not satisfactory then the worker will continue to job search and accept the reservation wage as their source of income.
What do we mean by ‘Seperation Rate’?
The seperation rate essentially models frictional unemployment. It’s the rate from when a worker leaves a role to the point when that position is replaced.
The welfare of an employed worker (Ve) decreases with what?
It is parallel to the seperation rate. As Ve decreases / increases; so does the seperation rate.
What increases the welfare of an unemployed worker (Vu)?
An increases to the unemployment benefit helps increase the welfare of the unemployed. Also an increase to the probability of job vacancies available (p) helps increase a the unemployed’s welfare.
Using the One - Sided Search Model, what will the effects be to an increase in unemployment benefits?
This entails that there should be an increase to the reservation wage (W*), which will thus increase the unemployed workers’ utility, presented by the upward shift to Vu - making the unemployed worker better off. As a result this will increase the unemployment rate
Using the One - Sided Search Model, what will the effects be to an increase in the job offer rate (p)?
This has 2 offsetting effects, firstly, it will cause an increase to the reservation wage (W*), thus causing an upward shift to Vu. The increased job offer rate helps to reduce / decrease unemployment - consequently shifting U left.
In the one-sided search model, an increase in the separation rate
Reduces the welfare of an employed worker.
In the one-sided search model, if the job offer rate goes down : what occurs?
The reservation wage goes down and the effect on long-run unemployment is ambiguous.
In the one-sided search model, the welfare of an employed worker is
A concave function of the real wage.
