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Compensating wage differentials, workers’ heterogeneity and imperfect competition in the labor market

Author

Listed:
  • WAUTHY, Xavier

    (FNRS and IRES, Université catholique de Louvain, Louvain-la-Neuve, Belgium)

  • ZENOU, Yves

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

In this paper, we explore a simple model which focuses on the joint role of workers’ heterogeneity and imperfect competition in the endogeneous formation of labor market equilibria. We show that, compared to the competitive case, imperfect competition leads to a misallocation of workers and to an increase of the level of unemployment when the population is heterogeneous. When workers are all identical, competitive and Nash allocations become the same.

Suggested Citation

  • WAUTHY, Xavier & ZENOU, Yves, 1997. "Compensating wage differentials, workers’ heterogeneity and imperfect competition in the labor market," LIDAM Discussion Papers CORE 1997005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1997005
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1997.html
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