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In the two side search model,explain what happens in equilibrium if the unemployment insurance benefit goes...

In the two side search model,explain what happens in equilibrium if the unemployment insurance benefit goes downa

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Answer #1

Two Sided Search Model of Unemployment:-

It is one-period model. In this model N are consumers who can all potentially work, and is the working age population. Number of firms is Woody. It is a successful match in the model is between one worker and one firm.

M=em(Q,A)

Matching Function,

M=aggregate number of matches.

e=Matching efficiency.

The search model of employment contains three elements, which are following.

First is how wages are set.

Second is number of vacancies.

and, Third is unemployed.

Workers and vacancies are brought together to create jobs.

If the unemployment insurance benefit goes downward, the unemployment rate increases or may be the people will go for search for new job opportunities even in low wage rates.

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