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Wage Dispersion and Wage Dynamics Within and Across Firms

  • Carrillo-Tudela, Carlos

    ()

    (University of Essex)

  • Smith, Eric

    ()

    (University of Essex)

This paper examines wage dispersion and wage dynamics in a stock-flow matching economy with on-the-job search. Under stock-flow matching, job seekers immediately become fully informed about the stock of viable vacancies. If only one option is available, monopsony wages result. With more than one firm bidding, Bertrand wages arise. The initial and expected threat of competition determines the evolution of wages and thereby introduces a novel way of understanding wage differences among similar workers. The resulting wage distribution has an interior mode and prominent, well-behaved tails. The model also generates job-to-job transitions with both wage cuts and jumps.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4031.

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Length: 34 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4031
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  29. Éva Nagypál, 2006. "On the extent of job-to-job transitions," 2006 Meeting Papers 10, Society for Economic Dynamics.
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