Steady-state equilibrium in a model of short-term wage-posting

Alan Manning

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper takes the canonical Burdett-Mortensen model of wage- posting and relaxes the assumption that wages are set once-for-all, instead assuming they can only be committed one period at a time. It derives a closed-form solution for a steady-state Markov Rank-Preserving Equilibrium and shows how this relates to the canonical model and performs some comparative statics on it. By means of example it is shown that a Rank-Preserving Equilibrium may fail to exist and that this non-existence can be a problem for plausible parameter values. The paper discusses how the model can be modified to ensure existence of a Rank-Preserving equilibrium. It is also shown, by means of example, how the opposite, a Rank-Inverting Equilibrium may exist.

Keywords: wage-posting; search (search for similar items in EconPapers)
JEL-codes: J31 J42 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012-07-31
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121780

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