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Wage bargaining with on-the-job search : theory and evidence

Author Info

  • Pierre Cahuc
  • Fabien Postel-Vinay
  • Jean-Marc Robin

    ()

Abstract

Most applications of Nash bargaining over wages ignore between-employer competition for labor services and attribute all of the workers' rent to their bargaining power. In this paper, we write and estimate an equilibrium model with strategic wage bargaining and on-the-job search and use it to take another look at the determinants of wages in France. There are three essential determinants of wages in our model: productivity, competition between employers resulting from on-the-job search, and the workers' bargaining power. We find that between-firm competition matters a lot in the determination of wages, because it is quantitatively more important than wage bargaining à la Nash in raising wages above the workers' "reservation wages," defined as out-of-work income. In particular, we detect no significant bargaining power for intermediate- and low-skilled workers, and a modestly positive bargaining power for high-skilled workers. Copyright The Econometric Society 2006.

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Paper provided by Laboratoire d'Economie Appliquee, INRA in its series Research Unit Working Papers with number 0212.

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Length: 63 pages
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:lea:leawpi:0212
Contact details of provider: Postal: INRA-LEA, 48, Boulevard Jourdan, 75014 Paris, France
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Web page: http://www.inra.fr/Internet/Departements/ESR/UR/lea/index.html

Keywords: search frictions; structural estimation; wage bargaining; labor market competition;

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Find related papers by 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
  • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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