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Education, Mobility and Employers’ Monopsony Power: A Search‐theoretic Analysis

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  • Bruno Decreuse
  • Pierre Granier

Abstract

. We analyse the efficiency of schooling choices in a wage‐posting search equilibrium model with on‐the‐job search. The workers have multidimensional skills and the search market is segmented by technology. Education determines the scope — or adaptability— of individual skills. Individuals obtain schooling to leave unemployment more quickly and to climb the wage ladder rapidly through job‐to‐job mobility — that is, to speed up job shopping. Education reduces firms’ monopsony power in the wage determination by improving workers’ mobility. As a result, the wage distribution shifts rightward with aggregate schooling. However, the ratio of vacant jobs to job seekers also falls in each sector. Either one or the other externality may dominate, implying, respectively, under‐ or over‐education. A combination of minimum wage and schooling fee can decentralize the efficient allocation.

Suggested Citation

  • Bruno Decreuse & Pierre Granier, 2005. "Education, Mobility and Employers’ Monopsony Power: A Search‐theoretic Analysis," LABOUR, CEIS, vol. 19(3), pages 531-562, September.
    • Handle: RePEc:bla:labour:v:19:y:2005:i:3:p:531-562
    DOI: 10.1111/j.1467-9914.2005.00310.x
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
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    Cited by:

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    2. Ana María Díaz, 2011. "The Employment Advantages of Skilled Urban Areas," Vniversitas Económica, Universidad Javeriana - Bogotá, vol. 0(0), pages 1-38.

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