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Do good workers hurt bad workers-or is it the other way around?

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  • Espen R. Moen

Abstract

I study the effect of worker heterogeneities on wages and unemployment in a directed search model. A worker's productivity in a given firm depends both on his type and on a worker-firm specific component. Firms advertise unconditional wage offers only. The resulting equilibrium is inefficient, with a too high wage premium for high-type workers, and too few high-type jobs. This reduces the welfare of high-type workers. My findings contrast with the findings in the literature on labor market segmentation, where it is argued that the existence of high-type workers forces down wages and reduces welfare for low-type workers. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Espen R. Moen, 2003. "Do good workers hurt bad workers-or is it the other way around?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 779-800, May.
    • Handle: RePEc:ier:iecrev:v:44:y:2003:i:2:p:779-800
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    Cited by:

    1. Tomer Blumkin & Yossi Hadar & Eran Yashiv, 2005. "Firm Productivity Dispersion And The Matching Role Of Ui Policy," Working Papers 0517, Ben-Gurion University of the Negev, Department of Economics.
    2. Blázquez, Maite & Jansen, Marcel, 2008. "Search, mismatch and unemployment," European Economic Review, Elsevier, vol. 52(3), pages 498-526, April.
    3. Espen R. Moen & Åsa Rosén, 2005. "Performance Pay and Adverse Selection," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 279-298, June.
    4. Javier Fernández‐Blanco & Pedro Gomes, 2017. "Unobserved Heterogeneity, Exit Rates, and Re‐Employment Wages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(2), pages 375-404, April.
    5. Blumkin, Tomer & Hadar, Yossi & Yashiv, Eran, 2009. "The macroeconomic role of unemployment compensation," LSE Research Online Documents on Economics 28517, London School of Economics and Political Science, LSE Library.
    6. Uren Lawrence, 2006. "The Allocation of Labor and Endogenous Search Decisions," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-31, June.
    7. Tomer Blumkin & Leif Danziger & Eran Yashiv, 2017. "Optimal unemployment benefit policy and the firm productivity distribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 36-59, February.
    8. Sattinger, Michael, 2006. "Overlapping labour markets," Labour Economics, Elsevier, vol. 13(2), pages 237-257, April.
    9. Masters, Adrian, 2010. "A theory of minimum wage compliance (or voluntary recognition of unions)," Labour Economics, Elsevier, vol. 17(1), pages 215-223, January.
    10. Adrian Masters, 2005. "Directed search without wage commitment: a new role for minimum wages and unions," 2005 Meeting Papers 347, Society for Economic Dynamics.
    11. Bond, Timothy N. & Lehmann, Jee-Yeon K., 2018. "Prejudice and racial matches in employment," Labour Economics, Elsevier, vol. 51(C), pages 271-293.
    12. Pedro Gomes & Javier Fernandez-Blanco, 2013. "On the Composition Effects on the Labor Market Outcomes," 2013 Meeting Papers 561, Society for Economic Dynamics.
    13. 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.
    14. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," American Economic Review, American Economic Association, vol. 95(4), pages 1327-1340, September.
    15. Maurício Benegas & Márcio Veras Corrêa, 2020. "Educational supply policies: distortions and labor market performance," Journal of Economics, Springer, vol. 129(3), pages 203-239, April.
    16. Blumkin, Tomer & Hadar, Yossi & Yashiv, Eran, 2005. "Firm Productivity Dispersion and the Matching Role of UI Policy," IZA Discussion Papers 1733, Institute of Labor Economics (IZA).

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