LO 6, 7 Suppose the governments goal is to reduce the unemployment rate. Some legislators propose that
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LO 6, 7 Suppose the government’s goal is to reduce the unemployment rate. Some legislators propose that the government should give a subsidy s to any irm that hires a worker. Some other legislators argue that it would be more efective to simply pay consumers to stay home rather than searching for work; that is, anyone who chooses not to participate in the labor force should receive a payment q. Which policy is more efective in achieving the government’s goal? Explain using the two-sided search model, with the aid of diagrams. [In your answer, do not concern yourself with how the subsidies from the government are inanced.]
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