Equilibrium Search with Time-Varying Unemployment

  title={Equilibrium Search with Time-Varying Unemployment},
  author={James Albrecht and Susan Vroman},
In this paper we show how time-varying unemployment benefits can generate equilibrium wage dispersion in an economy in which identical firms post wages and homogeneous risk-averse workers search for acceptable offers. We model a two-tier unemployment benefit system that is similar to real-world unemployment insurance programs. We assume that the unemployed initially receive benefits at rate b. Eventually, if a worker does not in the meantime find and accept a wage offer, the benefit falls to a… CONTINUE READING


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