Endogenous Outside Option in the Economy-Wide Model (v = w - c)
In an economy-wide model with identical firms, the expected net utility an unemployed worker gets from finding a new job () becomes an endogenous variable. It is determined by the uniform wage () and cost of effort () across all firms, expressed as . This relationship is then substituted into the general no-shirking wage curve equation to derive the wage for the entire economy.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
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Endogenous Outside Option in the Economy-Wide Model (v = w - c)
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