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Equilibrium Wage Dispersion: Monopsony or Sorting?

Author

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  • Giuseppe Moscarini

    () (Department of Economics & Cowles Foundation for Research in Economics New Haven, Connecticut, U.S.A.)

Abstract

Why are similar workers paid differently? I review and compare two lines of research that have recently witnessed great progress in addressing “unexplained” wage inequality: (i) worker unobserved heterogeneity in, and sorting by, human capital; (ii) firms’ monopsony power in labor markets characterized by job search frictions. Both lines share a view of wage differentials as an equilibrium phenomenon. Despite their profound conceptual and technical differences, they remain natural competitors in this investigation. Unlike other hypotheses, they provide natural and unifying explanations for job and worker flows, unemployment duration and incidence, job-to-job quits, and the shape of the wage distribution.

Suggested Citation

  • Giuseppe Moscarini, 2005. "Equilibrium Wage Dispersion: Monopsony or Sorting?," Rivista di Politica Economica, SIPI Spa, vol. 95(2), pages 3-24, March-Apr.
  • Handle: RePEc:rpo:ripoec:v:95:y:2005:i:2:p:3-24
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    References listed on IDEAS

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    1. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Specificity Of Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 63-115, February.
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    3. Bent Jesper Christensen & Rasmus Lentz & Dale T. Mortensen & George R. Neumann & Axel Werwatz, 2005. "On-the-Job Search and the Wage Distribution," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 31-58, January.
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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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