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Wage Competition with Heterogeneous Workers and Firms

  • Hamilton, Jonathan
  • Thisse, Jacques-Francois
  • Zenou, Yves

We study imperfect competition in the labor market when both workers and firms are heterogeneous. When firms cannot observe workers' skill, firms pay workers equal wages, but workers absorb training costs. When firms can identify worker types, firms pay different net wages to different workers. Voters select the level of general education that is financed by a lump-sum tax. Workers are on average better off when firms can observe workers' skill for a given level of general human capital, but the median voter prefers a higher level of general human capital when firms cannot observe worker types. Copyright 2000 by University of Chicago Press.

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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 18 (2000)
Issue (Month): 3 (July)
Pages: 453-72

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Handle: RePEc:ucp:jlabec:v:18:y:2000:i:3:p:453-72
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  12. Jellal, Mohamed & Thisse, Jacques-François & Zenou, Yves, 1998. "Demand Uncertainty, Mismatch and (Un)Employment: A Microeconomic Approach," CEPR Discussion Papers 1914, C.E.P.R. Discussion Papers.
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  14. Mills, David E. & Smith, William, 1996. "It pays to be different: Endogenous heterogeneity of firms in an oligopoly," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 317-329, May.
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