Steady-State Equilibrium in a Model of Short-Term Wage-Posting
This paper takes the canonical Burdett-Mortensen model of wage- posting and relaxes the assumption that wages are set once-for-all, instead assuming they can only be committed one period at a time. It derives a closed-form solution for a steady-state Markov Rank-Preserving Equilibrium and shows how this relates to the canonical model and performs some comparative statics on it. By means of example it is shown that a Rank-Preserving Equilibrium may fail to exist and that this non-existence can be a problem for plausible parameter values. The paper discusses how the model can be modified to ensure existence of a Rank-Preserving equilibrium. It is also shown, by means of example, how the opposite, a Rank-Inverting Equilibrium may exist.
|Date of creation:||Jul 2012|
|Date of revision:|
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- Giuseppe Moscarini & Fabien Postel-Vinay, 2010.
"Stochastic Search Equilibrium,"
Cowles Foundation Discussion Papers
1754, Cowles Foundation for Research in Economics, Yale University.
- Giuseppe Moscarini & Fabien Postel-Vinay, 2010. "Stochastic Search Equilibrium," Levine's Working Paper Archive 661465000000000001, David K. Levine.
- Fabien Postel-Vinay & Giuseppe Moscarini, 2013. "Stochastic Search Equilibrium," 2013 Meeting Papers 159, Society for Economic Dynamics.
- Giuseppe Moscarini & Fabien Postel-Vinay, 2013. "Stochastic Search Equilibrium," Sciences Po publications info:hdl:2441/22qd4iha9ql, Sciences Po.
- 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.
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