Selection Wages: An Example
Offering higher wages may enable firms to attract more applicants and screen them more carefully. If firms compete in this way in the labor market, "selection wages" emerge. This note illustrates this wage-setting mechanism. Selection wages may engender unconventional results, such as a pre-tax wage compression induced by the introduction of a progressive wage tax.
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- Phelps, Edmund S, 1995. "The Structuralist Theory of Employment," American Economic Review, American Economic Association, vol. 85(2), pages 226-31, May.
- Schlicht, Ekkehart, . "Job Rents in a Stylized Labor Market," Chapters in Economics, University of Munich, Department of Economics.
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