Efficient Wage Dispersion

Daron Acemoglu and R. Shimer

Working papers from Massachusetts Institute of Technology (MIT), Department of Economics

Abstract: In market economies, identical workers receive very different wages, violating the Walrasian 'law of one price'. We argue that in the absence of a Walrasian auctioneer to coordinate trade, wage dispersion among identical workers is an equilibriu m phenomenon. Moreover, wage dispersion is necessary for an economy to function efficiently. In the absence of wage dispersion, workers have little incentive to gather information, effectively giving monopsony power to firms.

Keywords: EFFICIENCY; WAGES; TECHNOLOGY (search for similar items in EconPapers)
JEL-codes: D83 J31 J41 (search for similar items in EconPapers)
Pages: 46 pages
Date: 1997
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Working Paper: Efficient Wage Dispersion (1997)
Working Paper: Efficient Wage Dispersion (1997)
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