Why is it that when unemployment compensation decreases the time spent on job search falls?
Posted by
brian in
Job Search HELP on
Feb 18th, 2010 |
2 responses
This was an answer I got wrong in one of my study guides. Is it because as compensation decreases the unemployed get jobs? If that’s the case, wouldn’t it be more likely that as unemployment compensation increases the job search of the unemployed would fall because it would serve as an incentive to not work?
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I would assume that it is because the people that make more income, or have the capability of making higher income have more incentive to go back to work. Those in the lower brackets that get less unemployment also have much less income when working and don’t really look forward to returning to another low wage job.
C=cY`=c(ßY)
C= rent paid to unemployed, an estimated Y` is calculated
Y=µL
C=cßµL
dC=cßµdL
dC/dL=cßµ
When we increase L, to keep an equilibrium in all markets, we have to vary C in cßµ units.