An Overlapping Generations Model of Wage Determination
AbstractThis paper provides a novel explanation of rising wage profiles and seniority rules. It is argued that whenever a firm bargains over a wage-employment package with its whole work force, a steady-state contract favors older workers. The reason is that old workers have no interest in improving the conditions of "young workers," while young workers do care about the treatment given to "old workers." Therefore, the work force as a whole displays a bias toward older workers, giving them higher wages as well as more job security. These results are derived in an n-period overlapping generations model and the effects of a shock to the firm's revenue function are analyzed. Copyright 1990 by The editors of the Scandinavian Journal of Economics.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 92 (1990)
Issue (Month): 1 ()
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
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- Lassila, Jukka, . "Essays on Taxes and Wage Formation," ETLA A, The Research Institute of the Finnish Economy, number 32.
- Torben Andersen & Henrik Vetter, 1995. "Equilibrium youth unemployment," Journal of Economics, Springer, vol. 61(1), pages 1-10, February.
- Danziger, Leif & Katz, Eliakim, 1996. "A theory of sex discrimination," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 57-66, October.
- Jukka Lassila, 2000. "Wage formation by majority voting and the incentive effects of pensions and taxation," Finnish Economic Papers, Finnish Economic Association, vol. 13(2), pages 89-115, Autumn.
- Lassila, Jukka, 2002. "Wage Formation by Majority Voting and the Incentive Effects of Pensions and Taxation," Discussion Papers 636, The Research Institute of the Finnish Economy.
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