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The immobile incumbent problem in a model of short-term wage-posting

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  • Manning, Alan

Abstract

This paper takes the canonical Burdett-Mortensen model of wage-posting and relaxes the assumption that wages are set once-for-all, instead assuming they can only be committed one period at a time. It derives a closed-form solution for a steady-state Markov Rank-Preserving Equilibrium and shows how this relates to the canonical model and performs some comparative statics on it. But it is shown that a Rank-Preserving Equilibrium may fail to exist because employers have more monopsony power over existing workers than new recruits and that this non-existence can be a problem for plausible parameter values. It is shown how a Rank-Inverting Equilibrium may exist. It is argued that this problem is likely to occur in a wide range of search models.

Suggested Citation

  • Manning, Alan, 2025. "The immobile incumbent problem in a model of short-term wage-posting," LSE Research Online Documents on Economics 127471, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:127471
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    File URL: http://eprints.lse.ac.uk/127471/
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    More about this item

    Keywords

    wage-posting; search; monopsony;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J1 - Labor and Demographic Economics - - Demographic Economics

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