Residual Wage Disparity in Directed Search Equilibrium

Ian King, John Kennes and Benoit Julien

No 209, Working Papers from Department of Economics, The University of Auckland

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 ' different wages due to different job qualities, and contract dispersion ' different wages due to different market experiences for workers. The equilibrium is also constrained-efficient ' 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: Economics (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:auc:wpaper:209

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