Search, Concave Production, and Optimal Firm Size

Eric Smith

Review of Economic Dynamics, 1999, vol. 2, issue 2, 456-471

Abstract: This paper demonstrates that in a free entry search and bargaining economy with concave production firms over-employ. Bargaining allows the worker's wage to depend upon marginal productivity. As such, with strictly concave production, the wage declines as firms employ more labour. Firms react to this declining wage function by choosing an inefficiently large number of workers. However, in equilibrium, fewer firms are likely to enter causing aggregate employment and vacancies to fall. (Copyright: Elsevier)

Keywords: search; Bargaining; labor hoarding; minimum wages; unions (search for similar items in EconPapers)
JEL-codes: J30 J41 J50 (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (84)

Downloads: (external link)
http://dx.doi.org/10.1006/redy.1998.0056 Full text (application/pdf)
Access to full texts is restricted to ScienceDirect subscribers and ScienceDirect institutional members. See http://www.sciencedirect.com/ for details.

Related works:
Working Paper: Search, Concave Production, and Optimal Firm Size (1994)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:v:2:y:1999:i:2:p:456-471

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1006/redy.1998.0056

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().