Competitive search markets with heterogeneous workers |
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Authors: | Roman Inderst |
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Affiliation: | Department of Economics and Department of Accounting and Finance, London School of Economics, Houghton Street, London WC2A 2AE, UK |
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Abstract: | This paper extends the concept of competitive search markets to the case with heterogeneous workers. If offers can condition on workers’ productivity as this depends on some formal qualification, the equilibrium is separating and efficient, though there is wage compression. If offers cannot condition on workers’ productivity, the nature of the equilibrium depends on the size of the workers’ productivity difference. For intermediate values of the productivity difference, separation is achieved only by paying high types an “efficiency wage” premium. We discuss several implications for wage dispersion and efficiency. |
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Keywords: | J41 |
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