Equilibrium Wage Distribution
This paper analyzes equilibrium in labor markets with costly search. Even in steady state equilibrium, identical labor may receive different wages; this may be the case even when the only source of imperfect information is the inequality of wages which the market is perpetuating. When there are information imperfections arising from (symmetric)differences in non-pecuniary characteristics of jobs and preferences of individuals, there will not in general exist a full employment, zero profit single wage equilibrium.There are, in general, a multiplicity of equilbria. Equilibrium may be characterized by unemployment; in spite of the presence of an excess supply of labor, no firm is willing to hire workers at a lowerwage. It knows that if it does so, the quit rate will be higher, and hence turnover costs(training costs) will be higher, so much so that profits will actually be lower. The model thus provides a rationale for real wage rigidity. The model also provides a theory of equilibrium frictional unemployment.Though the constrained optimality (taking explicitly into account the costs associated with obtaining information and search) may entail unemployment and wage dispersion, the levels of unemployment and wage dispersion in the market equilibrium will not, in general, be (constrained) optimal.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 95 (1985)
Issue (Month): 379 (September)
|Contact details of provider:|| Postal: |
Phone: +44 1334 462479
Web page: http://www.res.org.uk/
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishers.co.uk/asp/journal.asp?ref=0013-0133|
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.:
- Salop, Steven, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 393-406, October.
- Philip H. Dybvig & Gerald David Jaynes, 1980. "Output Supply, Employment, and Intra-Industry Wage Dispersion," Cowles Foundation Discussion Papers 546, Cowles Foundation for Research in Economics, Yale University.
- Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
- 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.
- George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
- Arnott, Richard J & Stiglitz, Joseph E, 1985. "Labor Turnover, Wage Structures, and Moral Hazard: The Inefficiency of Competitive Markets," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 434-62, October.
When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:95:y:1985:i:379:p:595-618. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.