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Search Direction And Wage Dispersion

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  • Marja-Liisa Halko
  • Klaus Kultti
  • and Juha Virrankoski

Abstract

In a directed search model, we allow the unemployed and the vacancies to choose whether to send or receive wage offers. This determines the market structure. There are several equilibria but a unique evolutionary stable one. Wage offers are made under incomplete information about the number of offers, and the equilibrium strategies involve mixing. This results in wage dispersion. We show that if the unemployment-vacancy ratio is close to unity, the stable equilibrium consists of two submarkets with opposite search directions. Otherwise, the long side of the market sends offers. The stable equilibrium is efficient, given the frictions. Copyright 2008 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Marja-Liisa Halko & Klaus Kultti & and Juha Virrankoski, 2008. "Search Direction And Wage Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 111-134, February.
  • Handle: RePEc:ier:iecrev:v:49:y:2008:i:1:p:111-134
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2008.00475.x
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    Cited by:

    1. Bruno Decreuse & André Zylberberg, 2011. "Search Intensity, Directed Search, And The Wage Distribution," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1168-1186, December.
    2. Lari Arthur Viianto, 2010. "Wage Bargaining in a Multiple Application Search Model with Recall," Department of Economics and Finance Working Papers EC201001, Universidad de Guanajuato, Department of Economics and Finance.
    3. Manolis Galenianos & Philipp Kircher & Gábor Virág, 2011. "Market Power And Efficiency In A Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 85-103, February.
    4. Derek G. Stacey, 2015. "Posted Prices, Search and Bargaining," Working Papers 059, Ryerson University, Department of Economics, revised Dec 2017.
    5. Yosuke Oda, 2008. "Note on the Determinants of Wage Dispersion," Discussion Papers in Economics and Business 08-37, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    6. repec:hal:journl:halshs-00638150 is not listed on IDEAS

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