'Residual' Wage Disparity in Directed Search Equilibrium

John Kennes (), Ian King () and Benoit Julien ()

Abstract: We examine how much of the observed wage dispersion among similar workers can be explained as a consequence of a lack of coordination among employers. To do this, we construct a directed search model with homogenous workers but where firms can create either good or bad jobs, aimed at either employed or unemployed workers. Workers in our model can also sell their labor to the highest bidder. The stationary equilibrium has both technology dispersion \226 different wages due to different job qualities, and contract dispersion \226 different wages due to different market experiences for workers. The equilibrium is also constrained- efficient \226 in stark contrast to undirected search models with technology dispersion. We then calibrate the model to the US economy and show that the implied dispersion measures are quite close to those in the data.

Keywords: Directed search; wage dispersion; Pissarides; matching technology; heterogeneity; On-the-job search (search for similar items in EconPapers)
JEL-codes: E24 E25 J31 J24 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: Written 2002-04-27
Note: Type of Document - pdf; prepared on IBM PC ; to print on Franciscan monk; pages: 35 ; figures: included. This paper was presented at the 2001 NBER summer workshop
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