Wage Profiles and Income Inequality among Identical Workers: A Simple Formalization
This paper explores the implications of the possible bankruptcies of firms for their own wage schemes and the structure of the labor market using a two-period general equilibrium model. The bankruptcy risk flattens the wage profile of each firm, weakening its incentive effect and thereby making room for the efficiency wage to be used as a supplementary incentive device. This, in turn, stratifies the labor market into the primary market, in which job rationing is observed, and the secondary market, in which job rationing is not observed. A substantial utility differential emerges between those who have found a job in the primary market and those who have not, even though there is no difference in their innate abilities. This differential widens as bankruptcies become more likely. Moreover, the dual structure of the labor market renders the employment size in the primary market too small to attain a social optimum.
|Date of creation:||Mar 2014|
|Contact details of provider:|| Postal: Kawauchi, Aoba-ku, Sendai 980-8476|
Web page: http://www.econ.tohoku.ac.jp/econ/english/index.html
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hori, Masahiro & Iwamoto, Koichiro, 2012. "Lifetime Labor Income and the Erosion of Seniority-Based Wages in Japan: Evidence Based on Administrative Data Records," CIS Discussion paper series 554, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
- Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
- Junya Hamaaki & Masahiro Hori & Saeko Maeda & Keiko Murata, 2012.
"Changes in the Japanese Employment System in the Two Lost Decades,"
Cornell University, ILR School, vol. 65(4), pages 810-846, October.
- Hamaaki, Junya & Hori, Masahiro & Maeda, Saeko & Murata, Keiko, 2011. "Changes in the Japanese Employment System in the Two Lost Decades," PIE/CIS Discussion Paper 511, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:toh:tergaa:314. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tohoku University Library)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.