Do Good Workers Hurt Bad Workers - or is it the Other Way Around?
In this article, I study the effect of worker heterogeneities on wages and unemployment within the context of a directed search model. A worker's productivity in a given firm depends both on their type and on a worker-firm specific component. Firms advertise unconditional wage offers, and hire the most productive workers that show up. The resulting equilibrium is inefficient, as the wage premium paid to high-type workers is too high, and the number of high-type jobs too low compared to the output-maximizing solution. This reduces the welfare of high-type workers. My findings contrast with the findings in the literature on labour market segmentation, where the argument is that the existence of high-type workers forces down wages to low-type workers and thus reduces the welfare of this group.
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- Kevin Lang & Michael Manove & William T. Dickens, 2005.
"Racial Discrimination in Labor Markets with Posted Wage Offers,"
American Economic Review,
American Economic Association, vol. 95(4), pages 1327-1340, September.
- Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-145, Boston University - Department of Economics.
- Moen, E.R., 1995.
"Competitive Search Equilibrium,"
37/1995, Oslo University, Department of Economics.
- Mortensen, Dale T & Pissarides, Christopher, 1999.
"New Developments in Models of Search in the Labour Market,"
CEPR Discussion Papers
2053, C.E.P.R. Discussion Papers.
- Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
- Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
- Montgomery, James D, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 163-79, February.
- Peters, Michael, 1997.
"On the Equivalence of Walrasian and Non-Walrasian Equilibria in Contract Markets: The Case of Complete Contracts,"
Review of Economic Studies,
Wiley Blackwell, vol. 64(2), pages 241-64, April.
- Michael Peters, 1995. "On the Equivalence of Walrasian and Non-Walrasian Equilibria in Contract Markets: The case of Complete Contracts," GE, Growth, Math methods 9507001, EconWPA.
- Michael Peters, 1995. "On the Equivalence of Walrasian and Non-Walrasian Equilibria in Contract Markets: The case of Complete Contracts," Working Papers peters-95-01, University of Toronto, Department of Economics.
- Lang, Kevin & Kahn, Shulamit, 1998. "The effect of minimum-wage laws on the distribution of employment: theory and evidence," Journal of Public Economics, Elsevier, vol. 69(1), pages 67-82, July.
- Kevin Lang & William T. Dickens, 1993. "Bilateral Search as an Explanation for Labor Market Segmentation and Other Anomalies," NBER Working Papers 4461, National Bureau of Economic Research, Inc.
- Inderst, Roman & Müller, Holger M., 1999. "Competitive Search Markets with Adverse Selection," Sonderforschungsbereich 504 Publications 99-52, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Jeremy I. Bulow & Lawrence H. Summers, 1985.
"A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment,"
NBER Working Papers
1666, National Bureau of Economic Research, Inc.
- Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
- Kevin Lang & William T. Dickens, 1992. "Labor Market Segmentation, Wage Dispersion and Unemployment," NBER Working Papers 4073, National Bureau of Economic Research, Inc.
- Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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