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Pecuniary Mobility Costs in a Two-Sector Model
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- Authors
- Issue Date
- 1996-04
- Citation
- Seoul Journal of Economics, Vol.9 No.2, pp. 163-174
- Keywords
- pecuniary cost ; two-sector model
- Abstract
- This paper develops a dynamic model of the labor market with a union sector and a nonunion sector in which workers who switch sectors have to bear pecuniary mobility costs. With pecuniary costs of workers, there exists a range of equilibria. And the size of the equilibrium range positively depends on pecuniary costs. When a shock is small, workers do not migrate and the wage rate alone absorbs the effects of the shock. The model also shows that a favorable spot sector-specific shock can increase not only unemployment but wage rates and that the economy needs more time to fully accomplish the adjustment process in response to a shock due to pecuniary mobility costs.
- ISSN
- 1225-0279
- Language
- English
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