Firms often receive multiple acceptable applications for vacancies,
requiring a choice among candidates. This paper contrasts equilibria when
firms select workers at random and when firms select the worker with the
shortest spell of unemployment, called ranking. With the filling of vacancies
unaffected by the selection rule, both equilibria have the same aggregate
dynamics, but different distributions of unemployment durations. With the
threat point for the Nash bargained wage being a worker with zero unemployment
duration, the wage with ranking is much more sensitive to changes in the
tightness of the labor market. The same holds for efficiency wages.
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