申論題

2 The labor search model (25 points)
Assume the workers in the model are all in the labor force. That is, the workers are either employed or unemployed, with U denoting the fractions of workers who are unemployed, and (1 - U) the fraction who are employed. The jobs of the employed differ according to the wage that they are paid. Each period, there is a probability p that the unemployed worker can draw one job offer from the wage distribution, . The worker has the option to reject the offer, in which case, he or she receives unemployment compensation. Alternatively, the worker can accept the offer to work at w, in which case, he or she receives w each period. Let   denote the expected value for a worker who has offer with wage w in hand. is an increasing and concave function of wage, u. In addition, V_u denotes the value of the unemployed worker, which is assunned to equal b. In the model, there will be fows between the pool of employed workers and the pool of unemployed worker. Some employed workers will be separated from their jobs and become unemployed, while some nnemployed workers will receive job offers that are suficiently attractive to accept. 1 (5 points) Let the reservation wage be defined as the wage such that the worker is indifferent between accepting and rejecting an offer. Please write down the equation that pins down the reservation wage in the model. Use the reservation wage to characterize the decision regarding accepting the job offer or not.