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Steady-State Equilibrium in a Model of Short-Term Wage-Posting

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  • Alan Manning

Abstract

This paper takes the canonical Burdett-Mortensen model of wage- posting and relaxes the assumption that wages are set once-for-all, instead assuming they can only be committed one period at a time. It derives a closed-form solution for a steady-state Markov Rank-Preserving Equilibrium and shows how this relates to the canonical model and performs some comparative statics on it. By means of example it is shown that a Rank-Preserving Equilibrium may fail to exist and that this non-existence can be a problem for plausible parameter values. The paper discusses how the model can be modified to ensure existence of a Rank-Preserving equilibrium. It is also shown, by means of example, how the opposite, a Rank-Inverting Equilibrium may exist.

Suggested Citation

  • Alan Manning, 2012. "Steady-State Equilibrium in a Model of Short-Term Wage-Posting," CEP Discussion Papers dp1158, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1158
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    File URL: https://cep.lse.ac.uk/pubs/download/dp1158.pdf
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    References listed on IDEAS

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    1. Giuseppe Moscarini & Fabien Postel-Vinay, 2013. "Stochastic Search Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1545-1581.
    2. Melvyn G. Coles, 2001. "Equilibrium Wage Dispersion, Firm Size and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 159-187, January.
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    Cited by:

    1. Langella, Monica & Manning, Alan Patrick, 2021. "The measure of monopsony," LSE Research Online Documents on Economics 113925, London School of Economics and Political Science, LSE Library.
    2. Jacek Suda & Marek Antosiewicz, 2016. "Business cycles and on the job search," IBS Working Papers 07/2016, Instytut Badan Strukturalnych.
    3. Monica Langella & Alan Manning, 2021. "Marshall Lecture 2020: The Measure of Monopsony [Monopsony in the UK]," Journal of the European Economic Association, European Economic Association, vol. 19(6), pages 2929-2957.
    4. Jacek Suda, 2016. "On the job search and working capital," IBS Working Papers 06/2016, Instytut Badan Strukturalnych.

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    More about this item

    Keywords

    Wage-posting; search;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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