In equilibrium in the two-sided search model, labour force participation is
A)not dependent on market tightness.
B)decreasing with increases in the benefits from searching.
C)the ratio of market tightness to the cost of a vacancy.
D)increasing in market tightness.
E)decreasing in market tightness.

Question

Quizplus · Accepted Answer

In the two-sided search model, labor force participation is generally increasing in market tightness. This is because higher market tightness (a higher ratio of vacancies to unemployed workers) typically indicates a more favorable job market for workers, making participation more attractive.

In Equilibrium in the Two-Sided Search Model, Labour Force Participation