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Search Direction And Wage Dispersion

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  • Marja-Liisa Halko
  • Klaus Kultti
  • and Juha Virrankoski

Abstract

In a directed search model, we allow the unemployed and the vacancies to choose whether to send or receive wage offers. This determines the market structure. There are several equilibria but a unique evolutionary stable one. Wage offers are made under incomplete information about the number of offers, and the equilibrium strategies involve mixing. This results in wage dispersion. We show that if the unemployment-vacancy ratio is close to unity, the stable equilibrium consists of two submarkets with opposite search directions. Otherwise, the long side of the market sends offers. The stable equilibrium is efficient, given the frictions. Copyright 2008 by the Economics Department Of The University Of Pennsylvania And 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): 49 (2008)
Issue (Month): 1 (02)
Pages: 111-134

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Handle: RePEc:ier:iecrev:v:49:y:2008:i:1:p:111-134

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Cited by:
  1. Manolis Galenianos & Philipp Kircher & Gábor Virág, 2011. "Market Power And Efficiency In A Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 85-103, 02.
  2. repec:hal:journl:halshs-00638150 is not listed on IDEAS
  3. Manolis Galenianos & Philipp Kircher & Gabor Virag, 2011. "Market power and efficiency in a search model," LSE Research Online Documents on Economics 29706, London School of Economics and Political Science, LSE Library.
  4. Lari Arthur Viianto, 2010. "Wage Bargaining in a Multiple Application Search Model with Recall," Department of Economics and Finance Working Papers EC201001, Universidad de Guanajuato, Department of Economics and Finance.
  5. repec:hal:cesptp:halshs-00638150 is not listed on IDEAS
  6. Yosuke Oda, 2008. "Note on the Determinants of Wage Dispersion," Discussion Papers in Economics and Business 08-37, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

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