To match or not to match? Optimal wage policy with endogenous worker search intensity
Fabien Postel-Vinay and
Jean-Marc Robin
Post-Print from HAL
Abstract:
We consider an equilibrium search model with on-the-job search where firms set wages. When an employee receives an outside job offer, it is optimal for the employer to try to retain the employee by matching the offer. This results in a wage increase for the worker. However, if workers are able to vary their search intensity, then this ‘offer-matching' policy runs into a moral hazard problem. Knowing that outside offers lead to wage increases, workers tend to search more intensively, which is costly for the firms. Assuming that firms can commit never to match outside offers, we examine the set of firm types for which it is preferable to do so. In particular, we show that a plausible pattern is one where a ‘dual' labor market emerges, with ‘bad' jobs at low-productivity, nonmatching firms and ‘good' jobs at high-productivity, matching firms.
Keywords: Labor market frictions; Wage dispersion; Search effort; Moral hazard (search for similar items in EconPapers)
Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (74)
Published in Review of Economic Dynamics, 2004, 7 (2), pp.297 - 330. ⟨10.1016/S1094-2025(03)00058-9⟩
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Related works:
Journal Article: To Match or Not to Match? Optimal Wage Policy With Endogenous Worker Search Intensity (2004) 
Working Paper: To Match or Not to Match? Optimal Wage Policy With Endogenous Worker Search Intensity (2004)
Working Paper: To Match or Not to Match? Optimal Wage Policy With Endogenous Worker Search Intensity (2004)
Working Paper: To match or not to match? Optimal wage policy with endogenous worker search intensity (2004)
Working Paper: To Match or Not To Match ? Optimal Wage Policy with Endogenous Worker search Intensity (2002) 
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:hal:journl:hal-03587620
DOI: 10.1016/S1094-2025(03)00058-9
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().