AN EQUILIBRIUM SEARCH MODEL WHEN FIRMS OBSERVE WORKERS' EMPLOYMENT STATUS* |
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| Authors: | Carlos Carrillo‐Tudela |
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| Institution: | 1. Department of Economics, University of Leicester, UK;2. I would like to thank Ken Burdett and Melvyn Coles for their many useful comments and insights. I would also like to thank Jean‐Marc Robin, Eric Smith, Ludovic Renou, and two anonymous referees for their comments. This article has benefited from comments and suggestions of participants in seminars at the University of Essex, Institute for Social and Economic Research (ISER, Essex), University of Warwick, Humboldt University (Berlin), and at the RES and EEA annual meetings. Financial support was given by the UK Universities (ORS), the University of Essex Postgraduate Studentship and the Royal Economic Society Junior Fellowship. The usual disclaimer applies. Please address correspondence to: Carlos Carrillo‐Tudela, Department of Economics, University of Leicester, Astley Clarke Building, University Road, Leicester, Leicestershire, LE1 7RH, United Kingdom. Phone: +44 116 252 2467. Fax: +44 116 252 2908. E‐mail: . |
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| Abstract: | This article considers an equilibrium search model, where firms post wages using information on workers' employment status. Earnings differentials between workers of different employment statuses are driven by firms' ability to discriminate workers' reservation wages. I study how these wage policies depend on firms' and workers' characteristics, and how these policies affect the wage distribution. The model delivers new predictions for the amount of wage dispersion that can be generated with search models and provides a better representation of the left tail of the wage distribution in the presence of a legal minimum wage than standard equilibrium search models. |
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