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Compensating Wage Differentials, Workers' Heterogeneity and Imperfect Competition in the Labor Market

Xavier Wauthy and Yves Zenou ()

No 1997003, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: In this paper, we explore a simple model which focuses on the joint role of workers' heterogeneity and imperfect competition in the endogeneous formation of labor market equilibria. We show that, compared to the competitive case, imperfect competition leads to a misallocation of workers and to an increase of the level of unemployment when the population is heterogeneous. When workers are all identical, competitive and Nash allocations become the same.

Keywords: perfect versus imperfect competition in the labor market; heterogeneous versus homogeneous workers (search for similar items in EconPapers)
Pages: 12
Date: 1997-02-01
New Economics Papers: this item is included in nep-lab
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