Unemployment, the Market for Interviews, and Wage Determination

Abstract

A model of equilibrium unemployment and vacancies is presented in which the absence of a market for interviews can yield externalities and inefficiency. Inefficiency results in market forces that lead firms to charge fees for interviews or to change the wage rate. These market forces require substantial information and may not operate. A graphical analysis shows how such forces would cause wages to adjust to shifts in supply, taxes, and transfers between workers and firms. With excessive unemployment, efficiency requires a transfer of income from workers to firms.