Fixed or Flexible? Wage Setting in Search Equilibrium
Why do some vacancies offer a posted wage whereas other offer a negotiable wage? The paper endogenizes the choice of wage policy in a search model with heterogeneous workers. In particular, we characterize the circumstances under which there exist an equilibrium where all firms negotiate wages. Generally, we find that a tight labor market favors bargaining over posting, as does large workers heterogeneity. In the equilibrium of our model, labor markets are tighter when workers are more productive, suggesting a reason why wages are more often negotiated for highly paid jobs.
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|Date of creation:||19 Aug 1997|
|Date of revision:|
|Publication status:||Published in Economica, 2003, pages 233-250.|
|Contact details of provider:|| Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden|
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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- repec:fth:harver:1517 is not listed on IDEAS
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