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

Author

Listed:
  • Robert E. Hall
  • Alan B. Krueger

Abstract

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.

Suggested Citation

  • Robert E. Hall & Alan B. Krueger, 2010. "Evidence on the Determinants of the Choice between Wage Posting and Wage Bargaining," NBER Working Papers 16033, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16033 Note: EFG
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    References listed on IDEAS

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    1. Guido Menzio, 2007. "A Theory of Partially Directed Search," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 748-769, October.
    2. Robert Shimer, 2010. "Labor Markets and Business Cycles," Economics Books, Princeton University Press, edition 1, number 9217, June.
    3. Giuseppe Moscarini & Fabien Postel-Vinay, 2009. "The Timing of Labor Market Expansions: New Facts and a New Hypothesis," NBER Chapters,in: NBER Macroeconomics Annual 2008, Volume 23, pages 1-51 National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Brenzel, Hanna & Gartner, Hermann & Schnabel, Claus, 2014. "Wage bargaining or wage posting? Evidence from the employers' side," Labour Economics, Elsevier, vol. 29(C), pages 41-48.
    2. Depew, Briggs & Sørensen, Todd A., 2013. "The elasticity of labor supply to the firm over the business cycle," Labour Economics, Elsevier, vol. 24(C), pages 196-204.
    3. Zaharieva, Anna, 2013. "Social welfare and wage inequality in search equilibrium with personal contacts," Labour Economics, Elsevier, vol. 23(C), pages 107-121.
    4. Bengtsson, Niklas, 2011. "Regulation Failure and CO2-emissions: An Experimental Investigation of the Cape Town Taxi Market," Working Paper Series, Center for Labor Studies 2011:13, Uppsala University, Department of Economics, revised 12 Aug 2013.
    5. Tommaso Monacelli & Vincenzo Quadrini & Antonella Trigari, 2011. "Financial Markets and Unemployment," NBER Working Papers 17389, National Bureau of Economic Research, Inc.
    6. Peter Diamond, 2011. "Unemployment, Vacancies, Wages," American Economic Review, American Economic Association, vol. 101(4), pages 1045-1072, June.
    7. Ernesto Dal Bó & Frederico Finan & Martín A. Rossi, 2013. "Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1169-1218.
    8. Susan E. Woodward & Robert E. Hall, 2012. "Diagnosing Consumer Confusion and Sub-optimal Shopping Effort: Theory and Mortgage-Market Evidence," American Economic Review, American Economic Association, vol. 102(7), pages 3249-3276, December.
    9. Marco Di Cintio & Emanuele Grassi, 2016. "The returns to temporary migration: The case of Italian Ph.D.s," EERI Research Paper Series EERI RP 2016/15, Economics and Econometrics Research Institute (EERI), Brussels.
    10. Paul Gomme & Damba Lkhagvasuren, 2011. "The Cyclicality of Search Intensity in a Competitive Search Model," Working Papers 11003, Concordia University, Department of Economics.
    11. Simon Janssen & Simone Tuor Sartore & Uschi Backes-Gellner, 2016. "Discriminatory Social Attitudes and Varying Gender Pay Gaps within Firms," ILR Review, Cornell University, ILR School, vol. 69(1), pages 253-279, January.
    12. Kawamura, Kohei & Sákovics, József, 2013. "Partial Equal Treatment in Wage Offers," SIRE Discussion Papers 2013-06, Scottish Institute for Research in Economics (SIRE).
    13. Fernández-Blanco, Javier, 2012. "A directed search model of intermediated trade," European Economic Review, Elsevier, vol. 56(8), pages 1481-1494.
    14. repec:spr:anresc:v:59:y:2017:i:3:d:10.1007_s00168-016-0749-6 is not listed on IDEAS
    15. Marta Lachowska, 2017. "Outside options and wages: What can we learn from subjective assessments?," Empirical Economics, Springer, vol. 52(1), pages 79-121, February.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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