Abstract
This paper analyzes a model of equilibrium wage dynamics and wage dispersion across firms. It considers a labor market where firms set wages and workers use on-the-job search to look for better paid work. It analyzes a perfect equilibrium where each firm can change its wage paid at any time, and workers use optimal quit strategies. Firms trade off higher wages against a lower quit rate, and large firms (those with more employees) always pay higher wages than small firms. Non-steady-state dispersed price equilibria are also analyzed, which describe how wages vary as each firm and the industry as a whole grow over time. Journal of Economic Literature Classification Numbers: D43, J41.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 159-187 |
| Number of pages | 29 |
| Journal | Review of Economic Dynamics |
| Volume | 4 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jan 2001 |
Keywords
- On-the-job search; wage dispersion; perfect equilibrium
ASJC Scopus subject areas
- Economics and Econometrics
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Cite this
Coles, M. G. (2001). Equilibrium Wage Dispersion, Firm Size, and Growth. Review of Economic Dynamics, 4(1), 159-187. https://doi.org/10.1006/redy.2000.0106