IDEAS home Printed from https://ideas.repec.org/p/auc/wpaper/209.html
   My bibliography  Save this paper

Residual Wage Disparity in Directed Search Equilibrium

Author

Listed:
  • King, Ian
  • Kennes, John
  • Julien, Benoit

Abstract

We examine how much of the observed wage dispersion among similar workers can be explained as a consequence of a lack of coordination among employers. To do this, we construct a directed search model with homogenous workers but where firms can create either good or bad jobs, aimed at either employed or unemployed workers. Workers in our model can also sell their labor to the highest bidder. The stationary equilibrium has both technology dispersion ' different wages due to different job qualities, and contract dispersion ' different wages due to different market experiences for workers. The equilibrium is also constrained-efficient ' in stark contrast to undirected search models with technology dispersion. We then calibrate the model to the US economy and show that the implied dispersion measures are quite close to those in the data.

Suggested Citation

  • King, Ian & Kennes, John & Julien, Benoit, 2001. "Residual Wage Disparity in Directed Search Equilibrium," Working Papers 209, Department of Economics, The University of Auckland.
  • Handle: RePEc:auc:wpaper:209
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2292/209
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daron Acemoglu & Robert Shimer, 2000. "Wage and Technology Dispersion," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 585-607.
    2. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
    3. Julien Benoit & Kennes John & King Ian Paul, 2001. "Auctions and Posted Prices in Directed Search Equilibrium," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-16, July.
    4. Arthur Sweetman & Peter Kuhn, 1998. "Unemployment Insurance and Quits in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 549-572, August.
    5. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-1127, September.
    6. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 457-475.
    8. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 163-179.
    9. Shi, Shouyong, 2001. "Frictional Assignment. I. Efficiency," Journal of Economic Theory, Elsevier, vol. 98(2), pages 232-260, June.
    10. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    11. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    12. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-969, July.
    13. Steven J. Davis, 2001. "The Quality Distribution of Jobs and the Structure of Wages in Search Equilibrium," NBER Working Papers 8434, National Bureau of Economic Research, Inc.
    14. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    15. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
    16. Benoit Julien & John Kennes & Ian King, 2000. "Bidding for Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 619-649, October.
    17. Melvyn G. Coles, 2001. "Equilibrium Wage Dispersion, Firm Size and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 159-187, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. John Kennes, 2004. "Competitive Auctions: Theory and Application," CAM Working Papers 2004-17, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    2. Julien, Benoit & Kennes, John & King, Ian, 2006. "The Mortensen rule and efficient coordination unemployment," Economics Letters, Elsevier, vol. 90(2), pages 149-155, February.
    3. John Kennes & Aaron Schiff, 2003. "The Value of a Reputation System," Industrial Organization 0301011, University Library of Munich, Germany.

    More about this item

    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
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:auc:wpaper:209. 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: (Library Digital Development). General contact details of provider: http://edirc.repec.org/data/deaucnz.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.