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Evidence on the Determinants of the Choice between Wage Posting and Wage Bargaining

  • Robert E. Hall
  • Alan B. Krueger

Some workers bargain with prospective employers before accepting a job. Others face a posted wage as a take-it-or-leave-it opportunity. Theories of wage formation point to substantial differences in labor-market equilibrium between bargained and posted wages. We surveyed a representative sample of U.S. workers to inquire about the wage determination process at the time they were hired into their current or most recent jobs. A third of the respondents reported bargaining over pay before accepting their current jobs. About a third of workers had precise information about pay when they first met with their employers, a sign of wage posting. About 40 percent of workers could have remained on their earlier jobs at the time they accepted their current jobs, indicating a more favorable bargaining position than is held by unemployed job-seekers. Our analysis of the distribution of wages shows that wage dispersion is higher among workers who bargained for their wages. Wages are higher among bargainers than non-bargainers, after adjusting for the differing compositions of the groups. Our results on wages give substantial support to the job-ladder model--workers who had the option to remain at their earlier jobs when they took their current jobs can earn higher wages than those without that option.

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File URL: http://www.nber.org/papers/w16033.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16033.

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Date of creation: May 2010
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Publication status: published as “Evidence on the Incidence of Wage Posting, Wage Bargaining, and On-the-Job Search” (with Alan B. Krueger), AEJ: Macroeconomics , October 2012, 4(4) 56–67
Handle: RePEc:nbr:nberwo:16033
Note: EFG
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