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

Akiomi Kitagawa, Souichi Ohta, Hiroshi Teruyama

Research output: Chapter in Book/Report/Conference proceedingChapter


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 Jan 1

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

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Economics and Econometrics
  • Finance

Cite this

Kitagawa, A., Ohta, S., & Teruyama, H. (2018). Ranking and long-term unemployment in a model with efficiency wages. In Advances in Japanese Business and Economics (pp. 65-115). (Advances in Japanese Business and Economics; Vol. 12). Springer. https://doi.org/10.1007/978-981-10-7158-4_3