COMPETITIVE SEARCH, EFFICIENCY, AND MULTIWORKER FIRMS

William Hawkins

International Economic Review, 2013, vol. 54, issue 1, 219-251

Abstract: I study competitive search equilibrium in an environment where firms operate a decreasing‐returns production technology and hire multiple workers simultaneously. Firms post wages, possibly several of them. The equilibrium can feature wage dispersion even though all firms and workers are ex ante identical. Unlike the benchmark where firms hire a single worker, hiring is constrained inefficient. Efficiency requires that firms commit to the number of hires, pay all applicants, or pay wages that depend on the number of applicants. Under wage‐posting, the inefficiency is highest at intermediate levels of labor market tightness.

Date: 2013
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