EconPapers    
Economics at your fingertips  
 

Wage Setting Under Targeted Search

Anton Cheremukhin and Paulina Restrepo-Echavarria

No 2020-041, Working Papers from Federal Reserve Bank of St. Louis

Abstract: When setting initial compensation, some firms set a fixed, non-negotiable wage while others bargain. In this paper we propose a parsimonious search and matching model with two sided heterogeneity, where the choice of wage-setting protocol, wages, search intensity, and degree of randomness in matching are endogenous. We find that posting and bargaining coexist as wage-setting protocols if there is sufficient heterogeneity in match quality, search costs, or market tightness and that labor market tightness and relative costs of search play a key role in the optimal choice of the wage-setting mechanism. Finally, we show that bargaining prevalence is positively correlated with wages, residual wage dispersion, and labor market tightness, both in the model and in the data.

Keywords: Wage bargaining; wage posting; wage dispersion (search for similar items in EconPapers)
JEL-codes: E24 J3 J41 (search for similar items in EconPapers)
Date: 2020-10, Revised 2021-07-20
New Economics Papers: this item is included in nep-dge, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2020/2020-041.pdf Full Text (application/pdf)

Related works:
Working Paper: Wage Setting Under Targeted Search (2021) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:88993

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2020.041

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2022-01-16
Handle: RePEc:fip:fedlwp:88993