Social Preferences, Skill Segregation, and Wage Dynamics
AbstractWe study the earning structure and the equilibrium assignment of workers to firms in a model in which workers have social preferences and skills are perfectly substitutable in production. We allow firms to offer long terms contracts and for frictions in the labour market in the form of mobility costs. For low moving costs between firms, heterogeneous productivities lead to widespread workplace skill segregation and the whole market wage dispersion is explained by between firms differences. In a labor market with intermediate levels of mobility costs, segregation is more moderate and wage dispersion arises both within and across firms. For high levels of moving costs the whole wage dispersion is within the firm, and becomes zero when the moving costs are sufficiently high. We show that long terms contracts in the presence of social preferences associate within-firm wage dispersion with novel "internal labor market" features such as a dynamic form of wage compression, gradual promotions, and wage non-monotonicity.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 205.
Date of creation: 2005
Date of revision:
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Social Preferences; Skill Segregation; Internal Labor Market.;
Other versions of this item:
- Antonio Cabrales & Antoni Calv�-Armengol & Nicola Pavoni, 2008. "Social Preferences, Skill Segregation, and Wage Dynamics," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 65-98.
- Antonio Cabrales & Antoni Calvó-Armengol & Nicola Pavoni, 2004. "Social Preferences, Skill Segregation and Wage Dynamics," Working Papers 181, Barcelona Graduate School of Economics.
- Cabrales Goitia Antonio & Calvó-Armengol Antoni & Pavoni Nicola, 2007. "Social Preferences, Skill Segregation and Wage Dynamics," Working Papers 201053, Fundacion BBVA / BBVA Foundation.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-01 (All new papers)
- NEP-LAB-2005-12-01 (Labour Economics)
- NEP-SOC-2005-12-01 (Social Norms & Social Capital)
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