IDEAS home Printed from https://ideas.repec.org/p/esx/essedp/2733.html
   My bibliography  Save this paper

Wage-Experience Contracts and Employment Status

Author

Listed:
  • Carrillo-Tudela, C

Abstract

The objective of this paper is to study equilibrium in a labour market in which identical firms post wage-contracts and ex-ante identical workers search on the job. The main novelty of this paper is to generate dispersion in contract offers by allowing firms to condition their offers on workers' initial experience and employment status although these characteristics do not affect productivity. In this context I show that changes in firms' information set at the moment of recruiting can have strong effects on wage dispersion and turnover without changing the agents' payoffs. I construct an equilibrium in which firms compete in promotion contracts. Employed and more experience workers are offered better contracts with shorter time-to-promotion periods. This implies contract offers are disperse within and between experience levels. The earnings distribution within the firm is then such that workers who have acquired more 'outside' firm experience and more tenure are higher in the earnings scale. This generates workers cohort effects within a firm that depend on the level of experience at which they where hired.

Suggested Citation

  • Carrillo-Tudela, C, 2005. "Wage-Experience Contracts and Employment Status," Economics Discussion Papers 2733, University of Essex, Department of Economics.
    • Handle: RePEc:esx:essedp:2733
    as

    Download full text from publisher

    File URL: https://repository.essex.ac.uk/2733/
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 989-1016, November.
    2. Carrillo-Tudela, C, 2004. "Wage-Tenure Contracts, Experience and Employment Status," Economics Discussion Papers 2735, University of Essex, Department of Economics.
    3. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, vol. 109(456), pages 283-306, June.
    4. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    5. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 921-955.
    6. Gerard J. van den Berg, 1990. "Nonstationarity in Job Search Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 255-277.
    7. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
    8. Fabien Postel-Vinay & Jean-Marc Robin, 2004. "To Match or Not to Match? Optimal Wage Policy With Endogenous Worker Search Intensity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 297-330, April.
    9. Margaret Stevens, 2004. "Wage-Tenure Contracts in a Frictional Labour Market: Firms' Strategies for Recruitment and Retention," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 535-551.
    10. Manning, Alan, 2000. "Movin' on up: Interpreting the Earnings-Experience Profile," Bulletin of Economic Research, Wiley Blackwell, vol. 52(4), pages 261-295, October.
    11. Burda, Michael C. & Mertens, Antje, 2001. "Estimating wage losses of displaced workers in Germany," Labour Economics, Elsevier, vol. 8(1), pages 15-41, January.
    12. Giovanni Sulis, 2008. "Wage Dispersion and Equilibrium Search Models: Some Evidence from Italy," LABOUR, CEIS, vol. 22(4), pages 593-627, December.
    13. Carrillo-Tudela, C, 2004. "Recruitment Policy When Firms Observe Workers' Employment Status: an Equilibrium Search Approach," Economics Discussion Papers 2732, University of Essex, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carlos Carrillo-Tudela, 2009. "An Equilibrium Search Model with Optimal Wage-Experience Contracts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 108-128, January.
    2. Cynthia Doniger, 2023. "Wage Dispersion with Heterogeneous Wage Contracts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 138-160, December.
    3. Gregory Jolivet & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "The Empirical Content of the Job Search Model: Labor Mobility and Wage Distributions in Europe and the U.S.$," Contributions to Economic Analysis, in: Structural Models of Wage and Employment Dynamics, pages 269-308, Emerald Group Publishing Limited.
    4. van den Berg, Gerard J. & van Vuuren, Aico, 2010. "The effect of search frictions on wages," Labour Economics, Elsevier, vol. 17(6), pages 875-885, December.
    5. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    6. Fitzenberger, Bernd & Garloff, Alfred, 2005. "Descriptive Evidence on Labor Market Transitions and the Wage Structure in Germany," ZEW Discussion Papers 05-95, ZEW - Leibniz Centre for European Economic Research.
    7. Eckstein, Zwi & van den Berg, Gerard J, 2003. "Empircial labor search models: A survey," Working Paper Series 2003:18, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    8. Adrian Masters & Melvyn Coles, 2004. "Duration Dependent Unemployment Insurance and Stabilisation Policy," Discussion Papers 04-10, University at Albany, SUNY, Department of Economics.
    9. Ronald Wolthoff, 2014. "It'S About Time: Implications Of The Period Length In An Equilibrium Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 839-867, August.
    10. Eckstein, Zvi & van den Berg, Gerard J., 2007. "Empirical labor search: A survey," Journal of Econometrics, Elsevier, vol. 136(2), pages 531-564, February.
    11. J. Ignacio Garcia-Perez, 2002. "Equilibrium search models: the role of the assumptions," Investigaciones Economicas, Fundación SEPI, vol. 26(2), pages 255-284, May.
    12. Carrillo-Tudela, C, 2004. "Recruitment Policy When Firms Observe Workers' Employment Status: an Equilibrium Search Approach," Economics Discussion Papers 2732, University of Essex, Department of Economics.
    13. Pieter Gautier & Jose Luis Moraga-Gonzalez & Ronald Wolthoff, 2007. "Structural Estimation of Search Intensity: Do non-employed workers search hard enough?," 2007 Meeting Papers 695, Society for Economic Dynamics.
    14. Cheng Wang & Youzhi Yang, 2023. "On the Pure Theory of Wage Dispersion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 47, pages 246-277, January.
    15. Garloff, Alfred, 2003. "Lohndispersion und Arbeitslosigkeit: Neuere Ansätze in der Suchtheorie," ZEW Discussion Papers 03-60, ZEW - Leibniz Centre for European Economic Research.
    16. Nobuhiro Kiyotaki & Ricardo Lagos, 2007. "A Model of Job and Worker Flows," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 770-819, October.
    17. Fabien Postel-Vinay & Jean-Marc Robin, 2004. "To Match or Not to Match? Optimal Wage Policy With Endogenous Worker Search Intensity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 297-330, April.
    18. Mark Armstrong & Jidong Zhou, 2016. "Search Deterrence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 26-57.
    19. Decreuse, Bruno & Zylberberg, André, 2006. "Job search with ubiquity and the wage distribution," MPRA Paper 3630, University Library of Munich, Germany, revised Apr 2007.
    20. Gerard J. van den Berg, 2003. "Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1337-1357, November.

    More about this item

    Keywords

    HB;

    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:esx:essedp:2733. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Essex Economics Web Manager The email address of this maintainer does not seem to be valid anymore. Please ask Essex Economics Web Manager to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/edessuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.