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On the firms’ component of wage dispersion: Endogenous effort versus search frictions

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  • Masters, Adrian

Abstract

This paper presents an environment in which firms’ productive heterogeneity passes through to wage dispersion via sequential search and endogenous worker effort levels. Despite small gains from trade, the model is able account for more than two thirds of the measured firm component of wage dispersion. The implied narrow range of worker utility effectively pins down the lowest wage in the distribution and higher wages simply compensate workers for their extra effort.

Suggested Citation

  • Masters, Adrian, 2016. "On the firms’ component of wage dispersion: Endogenous effort versus search frictions," Labour Economics, Elsevier, vol. 42(C), pages 213-220.
    • Handle: RePEc:eee:labeco:v:42:y:2016:i:c:p:213-220
    DOI: 10.1016/j.labeco.2016.08.006
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    Cited by:

    1. Marco Guerrazzi, 2020. "Efficiency-Wage Competition: What Happens as the Number of Players Increases?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(1), pages 13-35, March.

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    More about this item

    Keywords

    Wage dispersion; Sequential search;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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