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Equilibrium Wage Dispersion: An Example

Author

Listed:
  • Damien Gaumont
  • Martin Schindler

    (IMF)

  • Randall Wright

Abstract

Search models with posting and match-specific heterogeneity generate wage dispersion. Given K values for the match-specific variable, it is known that there are K reservation wages that could be posted, but generically never more than two actually are posted in equilibrium. What is unknown is when we get two wages, and which wages are actually posted. For an example with K = 3, we show equilibrium is unique; may have one wage or two; and when there are two, the equilibrium can display any combination of posted reservation wages, depending on parameters. We also show how wages, profits, and unemployment depend on productivity

Suggested Citation

  • Damien Gaumont & Martin Schindler & Randall Wright, 2006. "Equilibrium Wage Dispersion: An Example," 2006 Meeting Papers 147, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:147
    as

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    References listed on IDEAS

    as
    1. Damien Gaumont & Martin Schindler & Randall Wright, 2006. "Alternative Theories of Wage Dispersion," Contributions to Economic Analysis, in: Structural Models of Wage and Employment Dynamics, pages 61-82, Emerald Group Publishing Limited.
    2. Albrecht, James W & Axell, Bo, 1984. "An Equilibrium Model of Search Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 824-840, October.
    3. Curtis, Elisabeth & Wright, Randall, 2004. "Price setting, price dispersion, and the value of money: or, the law of two prices," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1599-1621, November.
    4. International Monetary Fund, 2005. "Alternative Models of Wage Dispersion," IMF Working Papers 2005/064, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Peter Ruppert & Elena Stancanelli & Etienne Wasmer, 2009. "Commuting, Wages and Bargaining Power," Annals of Economics and Statistics, GENES, issue 95-96, pages 201-220.
    2. Gaumont, Damien & Schindler, Martin & Wright, Randall, 2006. "Alternative theories of wage dispersion," European Economic Review, Elsevier, vol. 50(4), pages 831-848, May.
    3. repec:hal:spmain:info:hdl:2441/10031 is not listed on IDEAS

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    More about this item

    Keywords

    Search equilibrium; wage posting; wage dispersion; labor theory;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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