Fixed or Flexible? Wage Setting in Search Equilibrium
AbstractWhy do some vacancies offer a posted wage whereas others offer a negotiable wage? The paper endogenizes the choice of wage policy in a search model with heterogeneous workers. In particular, we characterize the circumstances under which there exist an equilibrium where all firms negotiate wages. Generally, we find that a tight labor market favors bargaining over posting, as does large worker heterogeneity. In the equilibrium of our model, labor markets are tighter when workers are more productive, suggesting a reason why wages are more often negotiated for highly paid jobs.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 185.
Length: 22 pages
Date of creation: 19 Aug 1997
Date of revision:
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More information through EDIRC
Search; wage offers; bargaining; posting;
Other versions of this item:
- Tore Ellingsen & Asa Rosen, 2003. "Fixed or Flexible? Wage-setting in Search Equilibrium," Economica, London School of Economics and Political Science, vol. 70(278), pages 233-250, 05.
- Ellingsen, T. & Rosen, A., 1997. "Fixed or Flexible? Wage Setting in Search Equilibrium," Papers 1997-17, Uppsala - Working Paper Series.
- Ellingsen, Tore & Rosén, Åsa, 1997. "Fixed or Flexible? Wage Setting in Search Equilibrium," Working Paper Series 1997:17, Uppsala University, Department of Economics.
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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