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Steady-state equilibrium in a model of short-term wage-posting

Author

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  • Manning, Alan

Abstract

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.

Suggested Citation

  • Manning, Alan, 2012. "Steady-state equilibrium in a model of short-term wage-posting," LSE Research Online Documents on Economics 121780, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121780
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    File URL: http://eprints.lse.ac.uk/121780/
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    More about this item

    Keywords

    wage-posting; search;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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