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Hiring Standards and Market Clearing

Author

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  • Schlicht, Ekkehart

    () (University of Munich)

Abstract

Consider a labour market with heterogeneous workers. Firms recruit workers by fixing a hiring standard and a wage offer simultaneously. A more demanding hiring standard necessitates a better wage offer in order to attract enough qualified applicants. As a result, an efficiency wage effect is obtained. An equilibrium emerges which does not clear the labour market. The wage level depends on structural characteristics of labour supply, such as heterogeneity and mobility of the workers. The model is contrasted with prevailing efficiency wage theories, and policy implications are also discussed.

Suggested Citation

  • Schlicht, Ekkehart, 2002. "Hiring Standards and Market Clearing," IZA Discussion Papers 481, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp481
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    References listed on IDEAS

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    1. Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March.
    2. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-125, March.
    3. Joseph E. Stiglitz, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC's: The Labor Turnover Model," The Quarterly Journal of Economics, Oxford University Press, vol. 88(2), pages 194-227.
    4. Schlicht, Ekkehart, 1978. "Labour Turnover, Wage Structure, and Natural Unemployment," Munich Reprints in Economics 1255, University of Munich, Department of Economics.
    5. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    6. Garcia, Gillian, 1972. "Olech's theorem and the dynamic stability of theories of the rate of interest," Journal of Economic Theory, Elsevier, vol. 4(3), pages 541-544, June.
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    Citations

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    Cited by:

    1. Johannes Ludsteck, 2014. "Exploiting Regional Heterogeneity to Test Wage Setting Theories - Firm Size Wage Effects in Urban and Rural Regions," ERSA conference papers ersa14p374, European Regional Science Association.
    2. Gerlach, Knut & Stephan, Gesine, 2005. "Wage distributions by wage-setting regime," IAB Discussion Paper 200509, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Schlicht, Ekkehart, 2007. "Wage Dispersion, Over-Qualification, and Reder Competition," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 1, pages 1-22.
    4. Büttner, Thomas & Jacobebbinghaus, Peter & Ludsteck, Johannes, 2010. "Occupational upgrading and the business cycle in West Germany," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-37.
    5. repec:iab:iabzaf:v:38:i:2/3:p:383-395 is not listed on IDEAS
    6. Meyer, Wolfgang & Gerlach, Knut, 2005. "Zusammenlegung von Arbeitslosen- und Sozialhilfe: Wirkungen auf Löhne, Beschäftigung und gewerkschaftliche Tarifpolitik (The merging of uneployment assistance and social aissistance * effects on wages," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 383-395.
    7. Gerlach Knut & Stephan Gesine, 2006. "Bargaining Regimes and Wage Dispersion," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(6), pages 629-645, December.
    8. Ludsteck, Johannes & Haupt, Harry, 2007. "An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition," Discussion Papers in Economics 1977, University of Munich, Department of Economics.
    9. Ludsteck, Johannes & Haupt, Harald, 2007. "An Empirical Test of the Reder Hypothesis," Discussion Papers in Economics 1397, University of Munich, Department of Economics.

    More about this item

    Keywords

    hiring standards; efficiency wages; wage formation; unemployment;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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    1. Effektivitetsløn in Wikipedia Danish ne '')
    2. Efficiency wage in Wikipedia English ne '')

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