NIT’s kill the economy and cause unemployment

The increase of the probability of separation between employer/employees has for direct effect to raise the number of unemployed people but also to decrease the number of vacant jobs making lower the tightness in labour market. Moreover, as it involves a diminution of the expected jobs’ life duration, the increase of s has for effect to raise wage that workers claims leading to an increase in λ to keep implicitly jobs profitability. As a consequence, average productivity as average wage decrease. We have to note that the probability to fill a vacant job rises since λ increases but also because there are less vacant jobs for more applicants. However, even if it is not possible to determine the effect on the hiring probability, the evident increase of the term s/p involves, because of flow equilibrium condition, an increase of unemployment. 4.2.2.3. Vacant job cost. The increase of the costs of creation and maintenance of vacant job has for consequence to decrease the number of these because they are less profitable. So it appears that it has a negative effect on the tightness in labour market. Concerning the effect on matching limit, λ, combining equation (28) and (33), we deduce that the diminution of θ induces a diminution of equilibrium value of less efficient job productivity y(λ) and, as a consequence, means an increase in λ (remind that y(λ) is decreasing in λ). This increase in limit λ has for direct effect to decrease the equilibrium average values of productivity and wage. Moreover, the probability of filling a vacant job raises seeing that the tightness on market is lower ant the investigation area is more important. However, taking into account equations (28) and (33), we show that the increase of the cost of a vacant job leads to a diminution of the probability p to be hired and consequently, an increase of the level of unemployment and a diminution of global production. 5. SIMULATIONS 5.1. Presentation In this 5th part, we initiate simulations in order to specify the results we obtained with theoretical analysis but also and mainly in order to determine the effect of the measure on θ. Consequently, for these simulations, in addition to the hypothesises already held, we consider as an explicit function of workers productivity a simple linear function of the form: y l = y − dl 0 )( As we have already precised, the budget constraint imposes us: ∫ = )0( ( ) ( ) 0 W w t w dw λ If we consider a tax function of the form t(w) = -α + γw and given that w(λ)<w(0), the financing of this measure imposes : γ λ α = + 2 w( ) w )0( These simulations, made with the software “Matlab”, permit us to study particularly the effects of the reform on unemployment rate, on production and on surplus. 5.2. The results The simulations gave the results presented in tables 2, 3 and 4. Case 1 corresponds to the reference situation that is the reform’s setting up. Consequently, cases 2, 3, 4 and 5 present the results of the implementation of a Negative Income Tax. In all the cases, we held the following parameters: β=0,5 ; d=0,5 ; s=0,05 ; x=0,9 ; c=0,5 ; N=1 and y0 = 0,5. Besides, in addition to the other variables already defined, Y represents global production, SC, the collective surplus and ,0( 544) WE, the utility of the worker initially the poorest.