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By Yoram Weiss, Gideon Fishelson

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Summers (1982) 'Unemployment Insurance and Labor Force Transitions' , National Bureau of Economic Research, Working Paper No. 920, June. Diamond, P. A. (1981) 'Mobility Costs, Frictional Unemployment, and Efficiency', Journal of Political Economy, Vol. 89, pp. 798-812. Diamond, P. A. (1982a) 'Wage Determination and Efficiency in Search Equilibrium', Review of Economic Studies, Vol. 49, pp. 217-27. Diamond, P. A. (1982b) 'Aggregate Demand Management in Search Equilibrium', Journal of Political Economy, Vol.

S[l-ova (2,2)-oEvf] Berkovitch: Stigma Theory of Unemployment 51 In order to compare these payoffs to the wages, we have to add the values we deleted from the utilities in the beginning. It can be seen that UI (Jt4 Ih) Uz (Jt 4 ) + oVo (2,1) + OEVf = = ~ [1 +Ovo (2,1) 2"1 [1+ 0Evf -OEVf] = w(1,0) -ovo (2,1)] = 1 - w(1,0). 6┬╗. Also, it can be seen that the (2,2) type receives a higher payoff. Indeed UI (Jt 4 Ib) + oVo (2,2) = ~ [1+ov o (2,2) -OEVf] > w(1,0) The solution for the bargaining problem with t types of player 1 may be obtained by investigating the above solution.

121-33. Stern, S. (1986) 'Nonsequential Search Among Heterogeneous Firms', University of Virginia Working Paper, November. Stern, S. (1989) 'Estimating a Simultaneous Search Model', Journal of Labor Economics, Forthcoming. Wilde, L. (1977) 'Labor Market Equilibrium Under Nonsequential Search', Journal of Economic Theory, Vol. 16, pp. 373-93. 2 A Stigma Theory of Unemployment Duration Elazar Berkovitch 1 INTRODUCTION Empirical studies of unemployment have shown that both the wage and the probability of leaving unemployment (the hazard rate) are negatively correlated with unemployment duration.

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