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Cyclical Variations in Wage Differentials and Unemployment.

  • Economics


This paper attempts to reformulate in a general-equilibrium framework M. W. Reder's model, which explains cyclical variations in wage differentials and their general tendencies to narrow. Specifically, the author focuses on the three aspects of his model: the microeconomic behavior of a firm under imperfect information about labor quality; the mechanism of the economy creating unemployment; and the interaction between wage differentials and unemployment. Its implications for the macroeconomic issues on the characteristics of current unemployment and the question of why aggregate employment fluctuates are also explored. Copyright 1987 by University of Chicago Press.

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