In an economic model where all firms are identical, an unemployed individual's 'outside option' is the net value they expect to receive from finding a new job. This value is calculated as the uniform wage paid by all firms minus the cost of effort required for the job. Suppose a new management technique is implemented across the entire economy that reduces the disutility (cost) of effort for all workers. Holding the wage constant, what is the immediate effect on the value of an unemployed person's outside option?
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In an economic model where all firms are identical, an unemployed individual's 'outside option' is the net value they expect to receive from finding a new job. This value is calculated as the uniform wage paid by all firms minus the cost of effort required for the job. Suppose a new management technique is implemented across the entire economy that reduces the disutility (cost) of effort for all workers. Holding the wage constant, what is the immediate effect on the value of an unemployed person's outside option?
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