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The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers

Author

Listed:
  • Fabien Postel-Vinay

    (LEA - Laboratoire d'Economie Appliquée - INRA - Institut National de la Recherche Agronomique)

  • Jean-Marc Robin

    () (CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique, EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We construct an equilibrium job search model with on-the-job search in which firms implement optimal-wage strategies under full information in the sense that they leave no rent to their employees and counter the offers received by their employees from competing firms. Productivity dispersion across firms results in wage mobility both within and across firms. Workers may accept wage cuts to move to firms offering higher future wage prospects. Equilibrium productivity dispersion across ex ante homogeneous firms can be endogenously generated. Productivity dispersion then generates a nontrivial wage distribution which is generically thin-tailed, as typically observed in the data

Suggested Citation

  • Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00357753, HAL.
  • Handle: RePEc:hal:cesptp:hal-00357753 DOI: 10.1111/1468-2354.t01-1-00045 Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00357753
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    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. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    3. Bontemps, Christian & Robin, Jean-Marc & van den Berg, Gerard J, 2000. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 305-358, May.
    4. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, pages 251-334.
    5. Mortensen, D. T. & Vishwanath, T., 1995. "Personal contacts and earnings: It is who you know!," Labour Economics, Elsevier, vol. 2(1), pages 103-104, March.
    6. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-1149, September.
    7. Bontemps, Christian & Robin, Jean-Marc & Van den Berg, Gerard J, 1999. "An Empirical Equilibrium Job Search Model with Search on the Job and Heterogeneous Workers and Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1039-1074, November.
    8. Dale T. Mortensen, 2000. "Modeling Matched Job-Worker Flows," Econometric Society World Congress 2000 Contributed Papers 1493, Econometric Society.
    9. Ken Burdett & Randall Wright, 1998. "Two-Sided Search with Nontransferable Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 220-245, January.
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    17. 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.
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    24. Mortensen, D.T., 1998. "Equilibrium Unemployment with Wage Posting: Burdett-Mortensen Meet Pissarides," Papers 98-14, Centre for Labour Market and Social Research, Danmark-.
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    26. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
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    Keywords

    The Distribution of Earnings;

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