Equilibrium Wage Dispersion,Firm Size,and Growth |
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| Institution: | 1. Hong Kong University of Science and Technology, Hong Kong Special Administrative Region;2. School of Statistics and Management, Shanghai University of Finance and Economics, No. 777 Guoding Road, Shanghai 200433, China;3. Investment Technology Group, NY, USA;1. Analytical Instrumentation Center, Anhui University of Technology, Maanshan, Anhui, 243002, PR China;2. Department of Applied Chemistry, Anhui University of Technology, Maanshan, Anhui, 243002, PR China;1. Department of Economics, New York University, 19 West 4th Street, New York, NY 10012, USA;2. Department of Economics, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong;1. Department of Economics, University of Macau, Taipa, Macao;2. Department of Finance and Business Economics, University of Macau, Taipa, Macao;3. School of Business, Macau University of Science and Technology, Taipa, Macao |
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| Abstract: | This paper analyzes a model of equilibrium wage dynamics and wage dispersion across firms. It considers a labor market where firms set wages and workers use on-the-job search to look for better paid work. It analyzes a perfect equilibrium where each firm can change its wage paid at any time, and workers use optimal quit strategies. Firms trade off higher wages against a lower quit rate, and large firms (those with more employees) always pay higher wages than small firms. Non-steady-state dispersed price equilibria are also analyzed, which describe how wages vary as each firm and the industry as a whole grow over time. Journal of Economic Literature Classification Numbers: D43, J41. |
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