NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Ranking, Unemployment Duration, and Wages

Olivier Jean Blanchard, Peter Diamond

NBER Working Paper No. 3387
Issued in June 1990
NBER Program(s):   EFG

Firms often receive multiple acceptable applications for vacancies, requiring a choice among candidates. This paper contrasts equilibria when firms select workers at random and when firms select the worker with the shortest spell of unemployment, called ranking. With the filling of vacancies unaffected by the selection rule, both equilibria have the same aggregate dynamics, but different distributions of unemployment durations. With the threat point for the Nash bargained wage being a worker with zero unemployment duration, the wage with ranking is much more sensitive to changes in the tightness of the labor market. The same holds for efficiency wages.

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Document Object Identifier (DOI): 10.3386/w3387

Published: Review of Economic Studies, Vol. 61-3 No. 208, July 1994, pp. 417-434. citation courtesy of

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