Hiring Standards And Labour Market Clearing
Consider a labour market with heterogeneous workers. When recruiting workers, firms set a hiring standard and make a wage offer. A more demanding hiring standard necessitates a better wage offer in order to attract enough qualified applicants. As a result, an efficiency wage effect is obtained. An equilibrium emerges which does not clear the labour market. The wage level depends on structural characteristics of labour supply, such as heterogeneity and mobility of the workers, but-in contrast to other efficiency-wage models-not on the level of unemployment and is, thus, compatible with increasing unemployment as observed, e.g. in Germany. Copyright Blackwell Publishing Ltd 2005.
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Volume (Year): 56 (2005)
Issue (Month): 2 (05)
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References listed on IDEAS
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- Schlicht, Ekkehart, 1978. "Labour Turnover, Wage Structure, and Natural Unemployment," Munich Reprints in Economics 1255, University of Munich, Department of Economics.
- Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March.
- Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
- Garcia, Gillian, 1972. "Olech's theorem and the dynamic stability of theories of the rate of interest," Journal of Economic Theory, Elsevier, vol. 4(3), pages 541-544, June.
- Stiglitz, Joseph E, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC'S: The Labor Turnover Model," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 194-227, May.
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
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