The immobile incumbent problem 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. But it is shown that a Rank-Preserving Equilibrium may fail to exist because employers have more monopsony power over existing workers than new recruits and that this non-existence can be a problem for plausible parameter values. It is shown how a Rank-Inverting Equilibrium may exist. It is argued that this problem is likely to occur in a wide range of search models.

Keywords: wage-posting; search; monopsony (search for similar items in EconPapers)
JEL-codes: J01 J1 R14 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2025-03-20
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Published in German Economic Review, 20, March, 2025. ISSN: 1468-0475

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:127471

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