2. Consider a version of the labor market model of Pissarides (1985) in which the matching functionM(u, v) isM(u, v) =u+ vand the discount factor 3 is one.(a) Derive an expression for the worker's job-finding probability p(8) and for the firm's worker-finding(or job-filling) probability, q(8).(b) Express the equilibrium market tightness 0 in terms of the parameters of the model, k, 5, 7, b, and(c) Express the equilibrium unemployment u* in terms of the parameters of the model.(d) Compute the effect of a small increase in the productivity of labor y on the equilibrium markettightness 0. Explain your findings.(e) Compute the effect of a small increase in the productivity of labor y on the equilibrium unem-ployment. Explain your findings.

The labor market also called the job market refers to the supply and demand of laborers. It shows…

2. Consider a version of the labor market model of Pissarides (1985) in which the matching function M(u, v) is M(u, v) and the discount factor ẞ is one. (a) Derive an expression for the worker's job-finding probability p(e) and for the firm's worker-finding (or job-filling) probability, q(6). (b) Express the equilibrium market tightness 9 in terms of the parameters of the model, k, 5, 7, b, and y- (c) Express the equilibrium unemployment u in terms of the parameters of the model. (d) Compute the effect of a small increase in the productivity of labor y on the equilibrium market tightness 0. Explain your findings. (e) Compute the effect of a small increase in the productivity of labor y on the equilibrium unem- ployment. Explain your findings.

2. Consider a version of the labor market model of Pissarides (1985) in which the matching function M(u, v) is M(u, v) and the discount factor ẞ is one. (a) Derive an expression for the worker's job-finding probability p(e) and for the firm's worker-finding (or job-filling) probability, q(6). (b) Express the equilibrium market tightness 9 in terms of the parameters of the model, k, 5, 7, b, and y- (c) Express the equilibrium unemployment u in terms of the parameters of the model. (d) Compute the effect of a small increase in the productivity of labor y on the equilibrium market tightness 0. Explain your findings. (e) Compute the effect of a small increase in the productivity of labor y on the equilibrium unem- ployment. Explain your findings.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.11P

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