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Why are similar workers paid differently? The role of social networks

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  • Francois Fontaine

Abstract

We provide a matching model where identical workers are embedded in ex-ante identical social networks. Job arrival rate is endogeneous and wages are bargained. We study the evolution of the networks with time and characterize the equilibrium distribution of unemployment rates across networks. We show that wage dispersion arises endogenously as the consequence of the dynamics of networks, firms' strategies and wage bargaining. We show that networks' dynamics, driven by the correlation between agents' statuses, induces unemployment persistence and wages positively correlated with age. Eventually, we show that a higher level of cooperation in networks or larger networks can surprisingly entail more wage dispersio

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 493.

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Date of creation: 2004
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Handle: RePEc:red:sed004:493

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Keywords: social networks; wage dispersion; matching; unemployment persistence;

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