Wage/Tenure Contracts with Heterogeneous Firms
AbstractThis paper investigates equilibria in a labor market where heterogeneous firms post wage/tenure contracts and risk-averse workers, both employed and unemployed, search for new job opportunities. Different firms, even those with the same productivity, typically offer different contracts. Equilibrium finds workers never quit from higher productivity firms to lower productivity firms, but turnover is inefficiently low as employees with large tenures at low productivity firms may reject job offers from more productive firms. A worker who quits to a more productive firm may take a wage cut in anticipation of better wage promotion prospects. Wages within a firm might also increase by a discrete amount at the end of an initial "probationary" spell.
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Bibliographic InfoPaper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 649.
Date of creation: 12 Nov 2007
Date of revision:
Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
Other versions of this item:
- NEP-ALL-2007-11-17 (All new papers)
- NEP-BEC-2007-11-17 (Business Economics)
- NEP-LAB-2007-11-17 (Labour Economics)
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