EconPapers    
Economics at your fingertips  
 

Wage Inequality in a Burdett-Mortensen World

Lawrence Uren and Gabor Virag ()
Additional contact information
Gabor Virag: University of Rochester

No 518, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: This paper examines the development of wage inequality in the context of a Burdett- Mortensen (1998) model that is extended to incorporate worker heterogeneity through skill requirements in the production process. In this environment, wage dispersion is a natural consequence of firms pursuing different wage strategies as well as a result of worker and firm production heterogeneity. Changes in the wage distribution are then explained by changes in the productivity of heterogeneous firms. The resulting change in theoretical steady state wage distributions as a result of changes in relative productivity is consistent with many of the observed changes in distribution of wages in the US in recent decades. In particular, an increase in the productivity of less efficient firms may reduce between-group inequality while at the same time increase within-group inequality as observed during the 1970s. On the other hand, an increase in productivity of more efficient firms will tend to increase both between- and within-group inequality as observed during the 1980s and 1990s.

Keywords: wage inequality; BM model; skill requirements (search for similar items in EconPapers)
Pages: 40 pages
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://econ.core.hu/doc/dp/dp/mtdp0518.pdf (application/pdf)

Related works:
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:has:discpr:0518

Access Statistics for this paper

More papers in CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies Contact information at EDIRC.
Bibliographic data for series maintained by Nora Horvath ().

 
Page updated 2022-01-21
Handle: RePEc:has:discpr:0518