Ranking and long-term unemployment in a model with efficiency wages

Akiomi Kitagawa, Souichi Ohta, Hiroshi Teruyama

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review


This chapter considers the long-run consequences of ranking job applicants on the basis of their unemployment durations by using a general equilibrium model, in which the wages paid by firms not only motivate their employees but also induce jobless workers to preserve their employability. Ranking and long-term unemployment become actual when the cost of establishing a new firm is so large that firms cannot pay high wages to their employees. By subsidizing newly established firms, the government can guide the economy to a more efficient equilibrium, in which every job seeker can find a new job by experiencing one period of unemployment, and thus firms’ distaste for the long-term unemployed is effectively nullified.

Original languageEnglish
Title of host publicationAdvances in Japanese Business and Economics
Number of pages51
Publication statusPublished - 2018

Publication series

NameAdvances in Japanese Business and Economics
ISSN (Print)2197-8859
ISSN (Electronic)2197-8867


  • Duration dependence
  • Efficiency wage
  • Employability
  • Long-term unemployment
  • Ranking
  • Statistical discrimination


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