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 (05)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Albrecht, James W & Axell, Bo, 1984.
"An Equilibrium Model of Search Unemployment,"
Journal of Political Economy,
University of Chicago Press, vol. 92(5), pages 824-40, October.
- Albrecht, James W & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Paper Series 99, Research Institute of Industrial Economics.
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- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
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"Price commitment in search markets,"
1993-9, Tilburg University, Center for Economic Research.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005.
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Oxford University Press, number 9780199279173, July.
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- Dale T. Mortensen, 1979.
"The Matching Process as a Non-Cooperative/Bargaining Game,"
384, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Dale T. Mortensen, 1982. "The Matching Process as a Noncooperative Bargaining Game," NBER Chapters, in: The Economics of Information and Uncertainty, pages 233-258 National Bureau of Economic Research, Inc.
- Dale T. Mortensen, 1988. "Equilibrium Wage Distrihutions: A Synthesis," Discussion Papers 811, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kevin Lang, 1991. "Persistent Wage Dispersion and Involuntary Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 181-202.
- repec:fth:harver:1517 is not listed on IDEAS
- Peter Diamond, 1985. "Search Theory," Working papers 389, Massachusetts Institute of Technology (MIT), Department of Economics.
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