Fixed or Flexible? Wage-setting in Search Equilibrium
Why do some vacancies offer a posted wage whereas others offer a negotiable wage? The paper endogenizes the choice of wage policy in a standard sequential search model with heterogeneous workers. In particular, we identify circumstances such that there exists an equilibrium in which all firms negotiate wages. We find that this equilibrium exists if and only if the labour market is sufficiently tight and worker heterogeneity is sufficiently large. Copyright The London School of Economics and Political Science 2003.
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Volume (Year): 70 (2003)
Issue (Month): 278 (May)
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- repec:fth:harver:1517 is not listed on IDEAS
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- Kevin Lang, 1991. "Persistent Wage Dispersion and Involuntary Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 181-202. Full references (including those not matched with items on IDEAS)
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