RESIDUAL WAGE DISPERSION WITH EFFICIENCY WAGES |
| |
| Authors: | Suphanit Piyapromdee |
| |
| Affiliation: | University College London, U.K.I am grateful to John Kennan and Rasmus Lentz for their guidance. I thank the editor Guido Menzio and the referees for their helpful reports. I also thank Andrew Anderson, Michael Choi, Tim Huegerich, Chenyan Lu, Kayuna Nakajima, Mariann Ollar, Fabien Postel‐Vinay, Jean‐Marc Robin, Nicolas Roys, Haomin Wang, and Randy Wright as well as seminar participants at UW‐Madison and Chicago Fed Search and Matching workshop for insightful comments. |
| |
| Abstract: | This article extends a classic on‐the‐job search model of homogeneous workers and firms by introducing a shirking problem. Workers choose their effort levels and search on the job. Firms elicit effort through wages and monitoring; an inverse relationship between wages and monitoring rates is derived. Wages play a dual role by allocating labor supply and motivating employee effort. This gives rise to an equilibrium wage distribution that contrasts with existing literature. In particular, I show that a hump‐shaped and positively skewed wage distribution, as observed empirically, can be derived even when firms and workers are, respectively, identical. |
| |
| Keywords: | |
|
|
