Residual wage dispersion with efficiency wages. (English) Zbl 1417.91317
Summary: 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.
MSC:
| 91B40 | Labor market, contracts (MSC2010) |
References:
| [1] | Abowd, J. M., and F.Kramarz, “The Costs of Hiring and Separations,” Labour Economics10 (2003), 499-530. |
| [2] | Albrecht, J. W., and B.Axell, “An Equilibrium Model of Search Unemployment,” Journal of Political Economy92 (1984), 824-40. |
| [3] | Albrecht, J. W., and S. B.Vroman, “Nash Equilibrium Efficiency Wage Distributions,” International Economic Review39 (1998), 183-203. |
| [4] | Bagger, J., B.Christensen, and D.Mortensen, “Wage and Productivity Dispersion: The Roles of Rent Sharing, Labor Quality, and Capital Intensity,” working paper, Northwestern University, Department of Economics, 2011. |
| [5] | Board, S., and M. Meyer‐terVehn, “Relational Contracts in Competitive Labour Markets,” The Review of Economic Studies82 (2015), 490-534. · Zbl 1405.91297 |
| [6] | Bontemps, C., J.‐M.Robin, and G. J.Van DenBerg, “Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation,” International Economic Review41 (2000), 305-58. |
| [7] | Brunello, G., “The Relationship between Supervision and Pay: Evidence from the British New Earnings Survey,” Oxford Bulletin of Economics and Statistics57 (1995), 309-21. |
| [8] | Burdett, K., and D. T.Mortensen, “Wage Differentials, Employer Size, and Unemployment,” International Economic Review39 (1998), 257-73. |
| [9] | Camera, G., and C.Selcuk, “Price Dispersion with Directed Search,” Working Papers 1173, Purdue University, Department of Economics, 2004. |
| [10] | Coles, M., “Equilibrium Wage Dispersion, Firm Size, and Growth,” Review of Economic Dynamics4 (2001), 159-87. |
| [11] | Greenwood, J., J. M.Sanchez, and C.Wang, “Financing Development: The Role of Information Costs,” American Economic Review100 (2010), 1875-91. |
| [12] | Hwang, H.‐s., D. T.Mortensen, and W. R.Reed, “Hedonic Wages and Labor Market Search,” Journal of Labor Economics16 (1998), 815-47. |
| [13] | Idson, T. L., and D. J.Feaster, “A Selectivity Model of Employer‐Size Wage Differentials,” Journal of Labor Economics8 (1990), 99-122. |
| [14] | Katz, L. F., and D. H.Autor, “Changes in the Wage Structure and Earnings Inequality,” in O. C.Ashenfelter (ed.) and D.Card (ed.), eds., Handbook of Labor Economics, Volume 3, Part A, Chapter 26 (Amsterdam: Elsevier, 1999), 1463-555. |
| [15] | Kramarz, F., and M.‐L.Michaud, “The Shape of Hiring and Separation Costs in France,” Labour Economics17 (2010), 27-37. |
| [16] | Markley, N. G., Principles of Differential Equations (New York: John Wiley & Sons, Inc., 2004). · Zbl 1057.34001 |
| [17] | Mortensen, D., Wage Dispersion: Why Are Similar Workers Paid Differently? (Cambridge, MA: MIT Press, 2005). |
| [18] | Mortensen, D. T., “Equilibrium Unemployment with Wage Posting: Burdett‐Mortensen Meet Pissarides,” in H.Bunzel (ed.), B.Christensen (ed.), P.Jensen (ed.), N. M.Kiefer (ed.), and D. T.Mortensen (ed.), eds., Panel Data and Structural Labour Market Models (Bingley, U.K.: Emerald Group Publishing Limited, 2000), 281-92. |
| [19] | Murray, F. J., and K. S.Miller, Existence Theorems for Ordinary Differential Equations (Malabar, FL: Robert E. Krieger Publishing Company, 1976). · Zbl 0347.34001 |
| [20] | Nagypál, É., “Worker Reallocation over the Business Cycle: The Importance of Employer‐to‐ Employer Transitions,” manuscript, Northwestern University, Department of Economics, 2008. |
| [21] | Neal, D., “Supervision and Wages across Industries,” The Review of Economics and Statistics75 (1993), 409-17. |
| [22] | Postel‐Vinay, F., and J.‐M.Robin, “Equilibrium Wage Dispersion with Worker and Employer Heterogeneity,” Econometrica70 (2002a), 2295-350. · Zbl 1137.91522 |
| [23] | Postel‐Vinay, F., and J.‐M.Robin, “The Distribution of Earnings in an Equilibrium Search Model with State‐Dependent Offers and Counteroffers,” International Economic Review43 (2002b), 989-1016. |
| [24] | Rosen, S., “Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition,” Journal of Political Economy82 (1974), 34-55. |
| [25] | Shapiro, C., and J. E.Stiglitz, “Equilibrium Unemployment as a Worker Discipline Device,” American Economic Review74 (1984), 433-44. |
| [26] | Strand, J., “Unemployment as a Discipline Device with Heterogeneous Labor,” The American Economic Review77 (1987), 489-93. |
| [27] | Walsh, F., “A Multisector Model of Efficiency Wages,” Journal of Labor Economics17 (1999), 351-76. |
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.
