IDEAS home Printed from https://ideas.repec.org/p/nya/albaec/05-02.html
   My bibliography  Save this paper

Directed Search without Wage Commitment and the Role of Labor Market Institutions

Author

Listed:
  • Adrian Masters

Abstract

An urn-ball matching model of directed search is analyzed in which the usual assumption of commitment to posted wages is dropped. One-on-one matches lead to a Nash bargained wage but when multiple applicants arrive competition drives the workers down to their continuation value. A minimum wage can act as a commitment device when (as in the USA) willful underpayment carries a stiffer penalty than "inadvertetn underpayment. The theory sheds new light on why firms appear to voluntarily bind themselves into paying higher wages than they would otherwise pay. Robustness to various sources of heterogeneity is considered

Suggested Citation

  • Adrian Masters, 2005. "Directed Search without Wage Commitment and the Role of Labor Market Institutions," Discussion Papers 05-02, University at Albany, SUNY, Department of Economics.
    • Handle: RePEc:nya:albaec:05-02
    as

    Download full text from publisher

    File URL: http://www.albany.edu/economics/research/workingp/2005/commitment.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Julien, Benoit & Kennes, John & King, Ian, 2006. "The Mortensen rule and efficient coordination unemployment," Economics Letters, Elsevier, vol. 90(2), pages 149-155, February.
    2. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    3. James Albrecht & Pieter A. Gautier & Susan Vroman, 2006. "Equilibrium Directed Search with Multiple Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 869-891.
    4. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    5. Espen R. Moen, 2003. "Do good workers hurt bad workers-or is it the other way around?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 779-800, May.
    6. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398, September.
    7. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
    8. Moen, Espen R., 2002. "Do Good Workers Hurt Bad Workers - or is it the Other Way Around?," CEPR Discussion Papers 3471, C.E.P.R. Discussion Papers.
    9. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    10. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    11. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-350, April.
    12. B. Petrongolo & Z. Eckstein & S. Ge, 2005. "Minimum Wage and Compliance in a Model of Search On-the-Job," 2005 Meeting Papers 76, Society for Economic Dynamics.
    13. Masters, Adrian M, 1999. "Wage Posting in Two-Sided Search and the Minimum Wage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 809-826, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matthew Doyle & Jacob Wong, 2013. "Wage Posting Without Full Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 231-252, April.
    2. Alexiadis, Stilianos & Eleftheriou, Konstantinos & Nijkamp, Peter, 2013. "Technology adoption within a search model: Evidence from OECD countries," Economic Modelling, Elsevier, vol. 33(C), pages 137-148.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Masters, Adrian, 2010. "A theory of minimum wage compliance (or voluntary recognition of unions)," Labour Economics, Elsevier, vol. 17(1), pages 215-223, January.
    2. Adrian Masters, 2005. "Directed search without wage commitment: a new role for minimum wages and unions," 2005 Meeting Papers 347, Society for Economic Dynamics.
    3. Sattinger, Michael, 2006. "Overlapping labour markets," Labour Economics, Elsevier, vol. 13(2), pages 237-257, April.
    4. Blumkin, Tomer & Hadar, Yossi & Yashiv, Eran, 2005. "Firm Productivity Dispersion and the Matching Role of UI Policy," IZA Discussion Papers 1733, Institute of Labor Economics (IZA).
    5. Tomer Blumkin & Yossi Hadar & Eran Yashiv, 2009. "The Macroeconomic Role of Unemployment Compensation," CEP Discussion Papers dp0909, Centre for Economic Performance, LSE.
    6. Athanasios Geromichalos, 2015. "Unemployment Insurance and Optimal Taxation in a Search Model of the Labor Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 365-380, April.
    7. Blázquez, Maite & Jansen, Marcel, 2008. "Search, mismatch and unemployment," European Economic Review, Elsevier, vol. 52(3), pages 498-526, April.
    8. Decreuse, Bruno & Zylberberg, André, 2006. "Job search with ubiquity and the wage distribution," MPRA Paper 3630, University Library of Munich, Germany, revised Apr 2007.
    9. Tomer Blumkin & Leif Danziger & Eran Yashiv, 2017. "Optimal unemployment benefit policy and the firm productivity distribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 36-59, February.
    10. Pieter A. Gautier & Christian L. Holzner, 2011. "Simultaneous Search and Network Efficiency," Tinbergen Institute Discussion Papers 11-092/3, Tinbergen Institute.
    11. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 11, pages 973-1041, Elsevier.
    12. Galenianos, Manolis & Kircher, Philipp, 2009. "Directed search with multiple job applications," Journal of Economic Theory, Elsevier, vol. 144(2), pages 445-471, March.
    13. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    14. Athanasios Geromichalos, 2015. "Unemployment Insurance and Optimal Taxation in a Search Model of the Labor Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 365-380, April.
    15. John Kennes, 2004. "Competitive Auctions: Theory and Application," Discussion Papers 04-16, University of Copenhagen. Department of Economics.
    16. Benjamin Lester, 2008. "Endogenous, State-Dependent Matching with Implications for the Cyclical Behavior of Unemployment," 2008 Meeting Papers 299, Society for Economic Dynamics.
    17. William B. Hawkins, 2013. "Competitive Search, Efficiency, And Multiworker Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 219-251, February.
    18. John Kennes, 2006. "Competitive Auctions: Theory and Application," Contributions to Economic Analysis, in: Structural Models of Wage and Employment Dynamics, pages 145-168, Emerald Group Publishing Limited.
    19. Pierre Cahuc & François Fontaine, 2009. "On the Efficiency of Job Search with Social Networks," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(3), pages 411-439, June.
    20. Manolis Galenianos & Philipp Kircher & Gábor Virág, 2011. "Market Power And Efficiency In A Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 85-103, February.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nya:albaec:05-02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Byoung Park (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.