Donatella Gatti

Equilibrium Unemployment, the Nature of Competence, the Organization of the Firm

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A major issue in the current economic debate is related to the striking difference between Europe, Japan and the US concerning the level of unemployment. This paper explores the micro determinants of these observed stylized facts. In the first part, a theoretical framework for this comparative analysis is presented. The starting point is the definition of different micro-institutional settings encompassing: (i) the organization of the firm; (ii) the nature of workers' competence; (iii) the structure of the labor market. In the second part, a model is proposed which takes up a "radical economics" perspective to analyze the choice made by firms about wage and effort, subject to each given micro-institutional setting. The main results point to the crucial role played by the mode of organization of the firm and the nature of workers' competence as key-determinants of the different levels of the unemployment rate across major developed countries.

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