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Advertisement versus Motivation in Competitive Search Equilibrium

Author

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  • Katsuya Takii

    (Osaka School of International Public Policy (OSIPP), Osaka University)

Abstract

We analyze equilibrium wage contracts in a competitive search model where a firm motivates workers to invest in a match-specific skill. If skill is not critical for production, the contract is first best. If critical, the contract coincides with an efficiency wage contract and cannot attain even second best. Unlike standard efficiency wage models, the wage plays a dual role, advertisement and motivation, which induces a novel source of inefficiency: the competition to attract workers forces a wage to be chosen that increases the ex ante utility of workers at the expense of ex post utility.

Suggested Citation

  • Katsuya Takii, 2014. "Advertisement versus Motivation in Competitive Search Equilibrium," OSIPP Discussion Paper 14E009, Osaka School of International Public Policy, Osaka University.
    • Handle: RePEc:osp:wpaper:14e009
    as

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    File URL: http://www.osipp.osaka-u.ac.jp/archives/DP/2014/DP2014E009.pdf
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    References listed on IDEAS

    as
    1. Masters, Adrian, 2011. "Commitment, advertising and efficiency of two-sided investment in competitive search equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 35(7), pages 1017-1031, July.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Search Theory; Incentive; Advertisement; Specific Skill;
    All these keywords.

    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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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