MONEY-WAGE DYNAMICS AND LABOR-MARKET EQUILIBRIUM △"<o (,v)=z=(1-可) z(u, v)= z(u, v)=z= const.>Ov FIG. 1.-Relations between vacancy and unemployment rates per unit time from the unemployment pool, denoted R, less the departures (due to death and retirement) per unit time of employed persons from the labor force, denoted D, and the quitting of employees to join the un employed in search of new jobs, denoted 2. This accountin voluntary terminations and layoffs, which I shall not treat, and it assumes that entrants to the labor force first enter the unemployment pool before being hired. Of course, the accessions and separations of employed ersons who transfer directly from one firm to another cancel out and do not add to n. that is N=R-D-Q shall make the variables on the right-hand side of (11)depend in the ggregate only upon unemployment (or employment), vacancies, and the labor supply. While the hire and quit rates of the individual firm depend upon its actual wage differential, the weighted average actual differential across all firms must be constant(being equal to zero), so one expects vage differentials to wash out in the aggregates I shall suppose that D is proportional to employment, 8 being the factor of proportionality. (This neglects any effect of a real wage change on people at the retirement margin. To eliminate scale effects (rightly or not), I shall take new hires and quits to be homogeneous of degree one Perhaps the dispersion of the wage differentials has some effect upon R and QMONEY-WAGE DYNAMICS AND LABOR-MARKET EQUILIBRIUM FIG.1.-Relations between vacancy and unemployment rates per unit time from the unemployment pool, denoted R, less the departures (due to death and retirement) per unit time of employed persons from the labor force, denoted D, and the quitting of employees to join the un￾employed in search of new jobs, denoted Q. This accounting ignores involuntary terminations and layoffs, which I shall not treat, and it assumes that entrants to the labor force first enter the unemployment pool before being hired. Of course, the accessions and separations of employed persons who transfer directly from one firm to another cancel out and do not add to N. That is, 1 shall make the variables on the right-hand side of (1 1) depend in the aggregate only upon unemployment (or employment), vacancies, and the labor supply. While the hire and quit rates of the individual firm depend upon its actual wage differential, the weighted average actual differential across all firms must be constant (being equal to zero), so one expects wage differentials to wash out in the aggregates.lg I shall suppose that D is proportional to employment, 6 being the factor of proportionality. (This neglects any effect of a real wage change on people at the retirement margin.) To eliminate scale effects (rightly or not), I shall take new hires and quits to be homogeneous of degree one in l9 Perhaps the dispersion of the wage differentials has some effect upon R and Q