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The Equilibrium Approach to Labor Markets

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  • Sherwin Rosen

Abstract

This paper exposits the modern theory of equalizing differences,viewed as optimal assignments of workers to jobs. The basic ideas are first illustrated in a simple model with binary choices of work attributes.Multinominal choices are briefly considered after that. Empirical implications are stressed, with special emphasis on elements of selectivity and stratification by tastes and technology. Applications are sketched for certain aspects of the economics of discrimination, human capital, the value of safety and the theory of implicit contracts. Issues raised by assignment stratification according to worker traits and productivities are discussed, and the principle sorting model by comparative advantageis outlined. The implied valuation system on personal traits and its relationship to factor-analytic models, as well as selectivity issues in educational and occupational choice illustrate this aspect of the theory.

Suggested Citation

  • Sherwin Rosen, 1983. "The Equilibrium Approach to Labor Markets," NBER Working Papers 1165, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1165
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    References listed on IDEAS

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    1. John M. Abowd & Orley C. Ashenfelter, 1981. "Anticipated Unemployment, Temporary Layoffs, and Compensating Wage Differentials," NBER Chapters, in: Studies in Labor Markets, pages 141-170, National Bureau of Economic Research, Inc.
    2. Mortensen, Dale T., 1983. "A welfare analysis of unemployment insurance: Variations on second-best themes," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 19(1), pages 67-97, January.
    3. Linnerooth, Joanne, 1979. "The Value of Human Life: A Review of the Models," Economic Inquiry, Western Economic Association International, vol. 17(1), pages 52-74, January.
    4. Rosen, Sherwin, 2007. "Studies in Labor Markets," National Bureau of Economic Research Books, University of Chicago Press, number 9780226726304, September.
    5. MacDonald, Glenn M, 1982. "Information in Production," Econometrica, Econometric Society, vol. 50(5), pages 1143-1162, September.
    6. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
    7. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    8. Robert E. Hall, 1970. "Why Is the Unemployment Rate So High at Full Employment?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 369-410.
    9. Antos, Joseph R. & Rosen, Sherwin, 1975. "Discrimination in the market for public school teachers," Journal of Econometrics, Elsevier, vol. 3(2), pages 123-150, May.
    10. Martin Neil Baily, 1974. "Wages and Employment under Uncertain Demand," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(1), pages 37-50.
    11. Sherwin Rosen, 1972. "Learning and Experience in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 7(3), pages 326-342.
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    Cited by:

    1. Cousineau, Jean-Michel, 1984. "La détermination des salaires des policiers municipaux au Québec," L'Actualité Economique, Société Canadienne de Science Economique, vol. 60(2), pages 186-199, juin.
    2. Steven F. Venti, 1987. "Wages in the Federal and Private Sectors," NBER Chapters, in: Public Sector Payrolls, pages 147-182, National Bureau of Economic Research, Inc.
    3. Roger, Guillaume, 2016. "Participation in moral hazard problems," Games and Economic Behavior, Elsevier, vol. 95(C), pages 10-24.
    4. Ignacio Rodríguez, 2004. "¿Ventajas Absolutas o Comparativas en las Habilidades Laborales? Evidencia Para el Mercado del Trabajo Chileno a Partir de la Encuesta IALS," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(122), pages 125-162.
    5. Beason, Dick, 2000. "Separation risk and firm size-earnings relationships in Japan and the US," Japan and the World Economy, Elsevier, vol. 12(3), pages 193-209, September.

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