IDEAS home Printed from https://ideas.repec.org/p/toh/tergaa/314.html
   My bibliography  Save this paper

Wage Profiles and Income Inequality among Identical Workers: A Simple Formalization

Author

Listed:
  • Akiomi Kitagawa

Abstract

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.

Suggested Citation

  • Akiomi Kitagawa, 2014. "Wage Profiles and Income Inequality among Identical Workers: A Simple Formalization," TERG Discussion Papers 314, Graduate School of Economics and Management, Tohoku University.
  • Handle: RePEc:toh:tergaa:314
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10097/56977
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    3. Junya Hamaaki & Masahiro Hori & Saeko Maeda & Keiko Murata, 2012. "Changes in the Japanese Employment System in the Two Lost Decades," ILR Review, Cornell University, ILR School, pages 810-846.
    4. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, pages 433-444.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baruník, Jozef & Kočenda, Evžen & Vácha, Lukáš, 2017. "Asymmetric volatility connectedness on the forex market," Journal of International Money and Finance, Elsevier, pages 39-56.
    2. Hiroshi Teruyama & Hiroyuki Toda, 2017. "Wage Profiles in the Japanese Dual Labor Market," KIER Working Papers 961, Kyoto University, Institute of Economic Research.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: http://edirc.repec.org/data/fetohjp.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.