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Efficient Wage Dispersion

Author

Listed:
  • Acemoglu, D.
  • Shimer, R.

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.

Suggested Citation

  • Acemoglu, D. & Shimer, R., 1997. "Efficient Wage Dispersion," Working papers 97-7, Massachusetts Institute of Technology (MIT), Department of Economics.
    • Handle: RePEc:mit:worpap:97-7
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    Citations

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    Cited by:

    1. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-291, April.
    2. repec:eee:labchp:v:3:y:1999:i:pb:p:2567-2627 is not listed on IDEAS
    3. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    4. repec:spo:wpmain:info:hdl:2441/dc0ckec3fcb29ms985085gkbp is not listed on IDEAS
    5. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
    6. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms985085gkbp is not listed on IDEAS
    7. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.

    More about this item

    Keywords

    EFFICIENCY ; WAGES ; TECHNOLOGY;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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