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Equilibrium Wage Dispersion: An Example
Author:
International Monetary Fund
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Series:
IMF Working Papers
Volume/Issue:
Volume 2006: Issue 019
Language:
English
Publication Date:
01 Jan 2006
DOI:
https://doi.org/10.5089/9781451862799.001
ISBN:
9781451862799
ISSN:
1018-5941
Pages:
16
Keywords:
WP
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Search models with posting and match-specific heterogeneity generate wage dispersion. Given K values for the match-specific variable, it is known that there are K reservation wages that could be posted, but generically never more than two actually are posted in equilibrium. What is unknown is when we get two wages, and which wages are actually posted. For an example with K = 3, we show equilibrium is unique; may have one wage or two; and when there are two, the equilibrium can display any combination of posted reservation wages, depending on parameters. We also show how wages, profits, and unemployment depend on productivity.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund