How the Economy Works: Confidence, Crashes and Self-Fulfilling Prophecies by Roger E. A. Farmer

Author:Roger E. A. Farmer [Farmer, Roger E. A.]
Language: eng
Format: epub, pdf
Tags: Macroeconomics, Theory, Economics, Monetary policy, Money & Monetary Policy, Political Science, Economic Policy, Public Policy, Free Enterprise, Business & Economics, Economic History
ISBN: 9780195397918
Publisher: Oxford University Press, USA
Published: 2010-04-08T04:00:00+00:00

102

H O W T H E E C O N O M Y W O R K S

Search time of

unemployed

workers

Job

Search time of

recruiters

FIGURE 7.2 Producing a job.

(see Figures 7.1 and 7.2), the inputs to the search technology are not like labor and capital. They are different because each of them is a commodity that one side of the market has more information about than the other.

Figure 7.1 illustrates the production process for a good.

The inputs are capital and labor. Workers operate machines and add value to raw materials. The output is a good such as a car, a computer, or a can of beans.

Figure 7.2 illustrates the production process for a job. The inputs are the search time of an unemployed worker and the search time of a recruiter in the personnel department of a firm. The recruiters sort through applications of unemployed workers and filter out those who are suitable for vacant jobs. Unemployed workers fill out applications and attend job interviews. The output is a match between an unemployed worker and a vacant position.

General equilibrium theory predicts that the search technology should be run by headhunting firms. Consider an example where the ABC employment agency matches workers with jobs. How would this work? The ABC

employment agency should buy the rights to match unemployed workers and vacant jobs from households and firms and put together workers and firms in the same way a computer dating service matches lonely hearts. Once the ABC

company has established that Maynard Jagger, an unemployed welder, would fit well with the vacant position at

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.