MONEY-WAGE DYNAMICS AND LABOR-MARKET EQUILIBRIUM these two variables together can be supposed to affect acce hence the expected duration of unemployment by anyone contemplating quitting. Second, when a firm finds it has unfilled jobs it will respond with ome combination of additional recruitment expenditures and an at tempted increase of the differential between the wage it pays and the wage paid elsewhere, in order to facilitate recruitment and encourage workers to seek employment at the firm as they learn of the higher differential. The magnitude of the desired differential on this account, for the ith firm, de pends presumably upon the number of vacancies in the firm, Vi, the size of the unemployment pool, U, the number of workers employed elsewhere, Let af denote the ith firms desired wage differential as defined by here w is the average wage paid by all firms and w* is the wage rate which the ith firm wishes to pay. Then the above theory states that Af=j(u, u,U,Vi N-NI, L) ow that j' is homogeneous of degree zero in the last four variables. Then we may write (8) if we neglect the small discrepancy (in the atomistic case) between N/L and (N- N/L. Now if all firms are much alike, we can express the average desired wage differential, denoted A", as a function of both the unemploy- ment rate and the aggregate vacancy rate, U= 2u, (as given in [5]: here I shall suppose 0 m120 Before discussing the postulated shape of the m function, let us take the last step A△*(λ a positive constant,i≡ dw/dt) ew workers -an for a short time! But this tendency will be inhibited con- its know the long- run costs of joining a firm that engages suppose, as an approximation, that new and old workers in a firm receive wageMONEY-WAGE DYNAMICS AND LABOR-MARKET EQUILIBRIUM (337 these two variables together can be supposed to affect accession rates and hence the expected duration of unemployment by anyone contemplating quitting. Second, when a firm finds it has unfilled jobs it will respond with some combination of additional recruitment expenditures and an at￾tempted increase of the differential between the wage it pays and the wage paid elsewhere, in order to facilitate recruitment and encourage workers to seek employment at the firm as they learn of the higher differential.17 The magnitude of the desired differential on this account, for the ith firm, de￾pends presumably upon the number of vacancies in the firm, V,,the size of the unemployment pool, U, the number of workers employed elsewhere, N - N,, and the size of the labor force, L. Let AT denote the ith firm's desired wage differential as defined by where w is the average wage paid by all firms and w: is the wage rate which the ith firm wishes to pay. Then the above theory states that AT =jl(u, c, U, V,,N -N,,L). Suppose now that j' is homogeneous of degree zero in the last four variables. Then we may write if we neglect the small discrepancy (in the atomistic case) between NIL and (N -N,)/L. Now if all firms are much alike, we can express the average desired wage differential, denoted A*, as a function of both the unemploy￾ment rate and the aggregate vacancy rate, c = Cp,(as given in [5]): where I shall suppose Before discussing the postulated shape of the m function, let us take the last step: Pi) -- Ah* (A a positive constant, k = ddwldt). U' l7 Of course the firm will be tempted to pay the higher wage differential only to new workers-and only for a short time! But this tendency will be inhibited con￾siderably if potential recruits know the long-run costs of joining a firm that engages in such sharp practices. I suppose, as an approximation, that new and old workers in a firm receive the same wage