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Wage Posting in Two-Sided Search and the Minimum Wage

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  • Masters, Adrian M

Abstract

This article focuses on wage formation in an equilibrium (two-sided) model of search with match-specific heterogeneity. Despite a large number (a continuum) of employers, search provides sufficient isolation to generate market power. By posting wages, employers, without collusion, capture most of the surplus that accrues to any match. The equilibrium wage is below that which maximizes employment. An example, using calibrated parameter values, is used to reconcile some recent, otherwise contradictory empirical results on the employment effects of minimum wage adjustments. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 40 (1999)
Issue (Month): 4 (November)
Pages: 809-26

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Handle: RePEc:ier:iecrev:v:40:y:1999:i:4:p:809-26

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Cited by:
  1. Fella, Giulio, 2012. "Matching, Wage Rigidities and Efficient Severance Pay," MPRA Paper 38638, University Library of Munich, Germany.
  2. Cahuc, Pierre & Laroque, Guy, 2007. "Optimal Taxation and Monopsonistic Labor Market: Does Monopsony Justify the Minimum Wage?," IZA Discussion Papers 2955, Institute for the Study of Labor (IZA).
  3. Adrian Masters, 2005. "Directed search without wage commitment: a new role for minimum wages and unions," 2005 Meeting Papers 347, Society for Economic Dynamics.
  4. Marcus Dittrich, 2010. "Minimum Wages and Unemployment Benefits in a Unionized Economy: A Game-Theoretic Approach," Annals of Economics and Finance, Society for AEF, vol. 11(2), pages 209-229, November.
  5. Gaumont, Damien & Schindler, Martin & Wright, Randall, 2006. "Alternative theories of wage dispersion," European Economic Review, Elsevier, vol. 50(4), pages 831-848, May.
  6. Ken Burdett & Randall Wright, 1998. "Two-Sided Search with Nontransferable Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 220-245, January.
  7. Adrian Masters, 2004. "Firm level hiring policy with culturally biased testing," Discussion Papers 04-14, University at Albany, SUNY, Department of Economics.
  8. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
  9. Michael Sattinger, 2003. "A Kaldor Matching Model of Real Wage Declines," Discussion Papers 03-04, University at Albany, SUNY, Department of Economics.
  10. Masters, Adrian & Muthoo, Abhinay, 2012. "Ex-Ante Price Commitment With Renegotiation In A Dynamic Market," The Warwick Economics Research Paper Series (TWERPS) 1000, University of Warwick, Department of Economics.
  11. Adrian Masters, 2005. "Directed Search without Wage Commitment and the Role of Labor Market Institutions," Discussion Papers 05-02, University at Albany, SUNY, Department of Economics.
  12. Dittrich, Marcus, 2007. "Minimum Wages and Union Bargaining in a Dual Labour Market," Dresden Discussion Paper Series in Economics 13/07, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  13. Adrian Masters, 2008. "Marriage, Commitment and Divorce in a Matching Model with Differential Aging," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 614-628, July.

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