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) |
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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