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The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers

Author

Listed:
  • Fabien Postel-Vinay

    (LEA - Laboratoire d'Economie Appliquée - INRA - Institut National de la Recherche Agronomique)

  • Jean-Marc Robin

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We construct an equilibrium job search model with on-the-job search in which firms implement optimal-wage strategies under full information in the sense that they leave no rent to their employees and counter the offers received by their employees from competing firms. Productivity dispersion across firms results in wage mobility both within and across firms. Workers may accept wage cuts to move to firms offering higher future wage prospects. Equilibrium productivity dispersion across ex ante homogeneous firms can be endogenously generated. Productivity dispersion then generates a nontrivial wage distribution which is generically thin-tailed, as typically observed in the data

Suggested Citation

  • Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00357753, HAL.
    • Handle: RePEc:hal:cesptp:hal-00357753
    DOI: 10.1111/1468-2354.t01-1-00045
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    Keywords

    The Distribution of Earnings;

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