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Equilibrium Wage Dispersion, Firm Size and Growth

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Author Info
Melvyn G. Coles (University of Essex and Institut d'Analisi Economica (Barcelona))

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Abstract

This paper analyses a model of equilibrium wage dynamics and wage dispersion across firms. It considers a labour market where firms set wages and workers use on-the-job search to look for better paid work. It analyses 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 analysed which descrive how wages vary as each firm and the industry as a whole grows over time. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.2000.0106
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 4 (2001)
Issue (Month): 1 (January)
Pages: 159-187
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Handle: RePEc:red:issued:v:4:y:2001:i:1:p:159-187

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Related research
Keywords: on-the-job search; wage dispersion; perfect equilibrium;

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-74, August. [Downloadable!] (restricted)
    Other versions:
  3. Alan B. Krueger & Lawrence H. Summers, 1987. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. John Pencavel, 1968. "An Analysis of the Quit Rate in American Manufacturing Industry," Working Papers 384, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  5. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, vol. 109(456), pages F283-306, June. [Downloadable!] (restricted)
    Other versions:
  6. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
  7. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Blackwell Publishing, vol. 35(4), pages 583-606, June. [Downloadable!] (restricted)
    Other versions:
  8. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May. [Downloadable!] (restricted)
    Other versions:
  10. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Takako Fujiwara-Greve & Henrich R. Greve, 2000. "The Role of Expectation in Job Search and Firm Size Effect on Wages," Econometric Society World Congress 2000 Contributed Papers 0857, Econometric Society. [Downloadable!]
  2. Nobuhiro Kiyotaki & Ricardo Lagos, 2006. "A model of job and worker flows," Staff Report 358, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  3. Guido Menzio, 2007. "A Search Theory of Rigid Prices," PIER Working Paper Archive 07-031, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  4. Alok Kumar, 2008. "Capital Tax, Minimum Wage, and Labor Market Outcomes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 133-154, January. [Downloadable!] (restricted)
  5. Alok Kumar, 2004. "Inflation and the Dispersion of Real Wages," Econometric Society 2004 Far Eastern Meetings 750, Econometric Society. [Downloadable!]
    Other versions:
  6. John Kennes & Ian Paul King & Benoit Julien, 2002. "'Residual' Wage Disparity in Directed Search Equilibrium," Macroeconomics 0205003, EconWPA. [Downloadable!]
  7. Charles Leung & Youngman Leong & Siu Wong, 2006. "Housing Price Dispersion: An Empirical Investigation," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 357-385, May. [Downloadable!] (restricted)
    Other versions:
  8. Robert Shimer, 2003. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies: Evidence and Theory," NBER Working Papers 9536, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Kenneth Burdett & Ricardo Lagos & Randall Wright, 2003. "An On-the-Job Search Model of Crime, Inequality, and Unemployment," PIER Working Paper Archive 03-030, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
    Other versions:
  10. Simonetta Longhi & Peter Nijkamp & Jacques Poot, 2004. "Spatial Heterogeneity and the Wage Curve revisited," Tinbergen Institute Discussion Papers 04-054/3, Tinbergen Institute. [Downloadable!]
    Other versions:
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