Abstract:Who knows the underlying productivity distribution function? Interestingly, this ambiguous function is often referenced to make decisions including job creations, wage determinations, contract formulations, etc. To investigate how ambiguity shapes labor markets, we integrate ambiguity preferences into the Diamond‐Mortensen‐Pissarides (DMP) model. We find that ambiguity‐averse job‐ and talent‐hunters are conservative. Our quantitative analysis indicates that but for the ambiguity, the American unemployment rate… Show more
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