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) (10 points) Now suppose, that if worker is fired, the worker is hired with probability (1 u) at wage w and puts in effort
) (10 points) Now suppose, that if worker is fired, the worker is hired with probability (1 u) at wage w and puts in effort E (does not want to get fired again) or is not hired with probability u and gets a zero wage. u is the unemployment rate. What is wage in the optimal contract? Show that it is decreasing in the unemployment rate
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Microeconomics
Authors: Dean Karlan, Jonathan Morduch
1st edition
978-0077332587, 007733258X, 978-0077332648, 77332644, 978-1259163531
