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EFFICIENCY OF WAGE BARGAINING WITH ON‐THE‐JOB SEARCH

Xiaoming Cai

International Economic Review, 2020, vol. 61, issue 4, 1749-1775

Abstract: This article studies efficiency in a general class of search models where both unemployed and employed workers search for better jobs and can meet multiple firms simultaneously. Employers can respond to outside offers and wages are a weighted average of the productivities of the current employer and a credible poaching firm. I derive a condition that balances firms' bargaining power and their meeting externality. This condition ensures efficiency of both worker turnover and firm entry. Finally, the efficiency condition unifies and extends many of the results on the efficiency of equilibrium search models.

Date: 2020
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International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

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