Bidding for Labor |
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| Authors: | Benoî t Julien, John Kennes,Ian King, |
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| Affiliation: | a School of Economics and Finance, Institute for the Study of Competition and Regulation, Victoria University of Wellington, Wellington, New Zealand;b Department of Economics, Pace University, 1 Pace Plaza, New York, New York, 10038;c Department of Economics, University of Victoria, Victoria, British Columbia, V8W 2Y2, Canada;Department of Economics, University of Auckland, Private Bag 92019, Auckland, New Zealandf1 |
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| Abstract: | We present a competing-auction theory of the labor market, where job candidates auction their labor services to employers. An equilibrium matching function emerges which has many of the features commonly assumed, including constant returns to scale in large economies. The auction mechanism also generates equilibrium wage dispersion among homogeneous workers and constrained-efficient entry of vacancies in large economies. In a dynamic version of the model, we generate implied numerical values for equilibrium unemployment and wage dispersion. The theory makes the novel prediction that wage dispersion is a decreasing function of the discount factor and labor market tightness. Journal of Economic Literature Classification Numbers: E24, J31, J41, J64, D44. |
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| Keywords: | matching wage dispersion auctions unemployment efficiency |
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