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Wages and Employment With Firm-Specific Seniority

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  • Yannis M. Ioannides
  • Christopher A. Pissarides

Abstract

We examine wages and employment for junior and senior workers when seniority is firm-specific. We show that if workers are risk averse, the firm chooses both the junior and senior wage independently of the wage offers received by its workers from other firms. Junior workers are paid less than the value of their marginal product and senior workers are paid more. If the firm can monitor its workers' outside offers, it will choose to lay off workers with good offers, but which, nevertheless, may not be so good as its own senior wage.

Suggested Citation

  • Yannis M. Ioannides & Christopher A. Pissarides, 1983. "Wages and Employment With Firm-Specific Seniority," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 573-580, Autumn.
    • Handle: RePEc:rje:bellje:v:14:y:1983:i:autumn:p:573-580
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    Cited by:

    1. Katharine G. Abraham & James L. Medoff, 1983. "Length of Service and the Operation of Internal Labor Markets," NBER Working Papers 1085, National Bureau of Economic Research, Inc.
    2. Izumi Yokoyama & Takuya Obara, 2017. "Optimal combination of wage cuts and layoffs—the unexpected side effect of a performance-based payment system," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-15, December.
    3. Azariadis, Costas, 1987. "Les marchés imparfaits dans la théorie macroéconomique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 63(4), pages 311-330, décembre.

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