Wage Dispersion with Heterogeneous Wage Contracts

Cynthia Doniger

No 2015-23, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: I study a labor market in which identical workers search on- and off-the-job and heterogeneous firms employ using either posted wages or wage contracts contingent on outside options. Firm level costs for contingent contracts generate a separating equilibrium in which less productive firms post wages. The model with heterogeneous contracts can achieve wage dispersion, labor share, employment transitions, and flow value of unemployment that are simultaneously consistent with empirical observations even when most firms post wages. Using German employee-level administrative data, I estimate roughly 70 percent of firms post wages and employ nearly 50 percent of workers under such contracts.

Keywords: Labor supply and demand; Market structure and pricing; Wages and compensation (search for similar items in EconPapers)
Pages: 55 pages
Date: 2015-03-26
New Economics Papers: this item is included in nep-cta and nep-dge
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Citations: View citations in EconPapers (7)

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http://dx.doi.org/10.17016/FEDS.2015.023 http://dx.doi.org/10.17016/FEDS.2015.023 (application/pdf)

Related works:
Journal Article: Wage Dispersion with Heterogeneous Wage Contracts (2023)
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