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Selection Wages: An Illustration

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  • Schlicht, Ekkehart

Abstract

Offering higher wages may enable firms to attract more applicants and screen them more carefully. If firms compete in this way in the labor market, "selection wages" emerge. This note illustrates this wage-setting mechanism. Selection wages may engender unconventional results, such as a pre-tax wage compression induced by the introduction of a progressive wage tax.

Suggested Citation

  • Schlicht, Ekkehart, 2006. "Selection Wages: An Illustration," Discussion Papers in Economics 958, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenec:958
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    File URL: https://epub.ub.uni-muenchen.de/958/1/schlicht_selectionwages_exampleDP.pdf
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    References listed on IDEAS

    as
    1. Schlicht, Ekkehart, . "Job Rents in a Stylized Labor Market," Chapters in Economics,, University of Munich, Department of Economics.
    2. Phelps, Edmund S, 1995. "The Structuralist Theory of Employment," American Economic Review, American Economic Association, vol. 85(2), pages 226-231, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    wage formation; efficiency wage; incentive wage; mobility; job-specific pay; wage-tax;
    All these keywords.

    JEL classification:

    • 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
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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