Monitoring Intensity and Technology Choice in a Model of Unemployment

Zhou, Haiwen

doi:10.1057/s41302-019-00144-5

Cited by 1 publication

(2 citation statements)

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“…Implicitly shirking detection is done by firms and the associated costs are not considered explicitly. Alternatively, shirking on the firm side can be modelled explicitly by a cost like Zhou (2020) who considers a firm's choice of monitoring intensity. A higher level of detection probability leads to a higher monitoring cost.…”

Section: The Modelmentioning

confidence: 99%

“…Wen and Zhou (2020) have addressed the impact of financial and trade integration in a model of technology choice with the presence of efficiency wages in a general equilibrium model. In Zhou (2020), the interactions among a firm's choices of technology, output, and monitoring intensity are studied in a general equilibrium model in which firms engage in oligopolistic competition. One significant difference between this paper and those models is that those models do not allow for capital accumulation through saving of consumers.…”

Section: Introductionmentioning

confidence: 99%

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Shirking and capital accumulation under oligopolistic competition

Zhou,

Zhou

2023

JES

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PurposeThe purpose of the paper is to study how technology choice is affected by capital accumulation when there is unemployment and firms engage in oligopolistic competition.Design/methodology/approachIn this infinite horizon model, unemployment results from the existence of efficiency wages. Consumers choose saving optimally, and there is capital accumulation. Firms producing intermediate goods engage in oligopolistic competition and choose technologies to maximize profits. A more advanced technology has a higher fixed cost but a lower marginal cost of production.FindingsIn the steady state, it is shown that an increase in population size or a decrease in the discount rate leads intermediate good producers to choose more advanced technologies and the wage rate increases. Interestingly, the equilibrium unemployment rate decreases with the size of the population.Originality/valueIn this model, unemployment results from the existence of efficiency wages and firms engage in oligopolistic competition. One difficulty with efficiency wage models is that saving is not allowed. However, in this model, consumers choose saving optimally, and capital accumulation is allowed. With oligopolistic competition, the authors show that an increase in population size or a decrease in the discount rate leads intermediate good producers to choose more advanced technologies and the wage rate increases. The equilibrium unemployment rate decreases with the size of the population.

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Section: The Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%