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'Residual' Wage Disparity in Directed Search Equilibrium

Author

Listed:
  • John Kennes

    (The University of Auckland)

  • Ian Paul King

    (The University of Auckland)

  • Benoit Julien

    (The University of Miami)

Abstract

We examine how much of the observed wage dispersion among similar workers can be explained as a consequence of a lack of coordination among employers. To do this, we construct a directed search model with homogenous workers but where firms can create either good or bad jobs, aimed at either employed or unemployed workers. Workers in our model can also sell their labor to the highest bidder. The stationary equilibrium has both technology dispersion \226 different wages due to different job qualities, and contract dispersion \226 different wages due to different market experiences for workers. The equilibrium is also constrained- efficient \226 in stark contrast to undirected search models with technology dispersion. We then calibrate the model to the US economy and show that the implied dispersion measures are quite close to those in the data.

Suggested Citation

  • John Kennes & Ian Paul King & Benoit Julien, 2002. "'Residual' Wage Disparity in Directed Search Equilibrium," Macroeconomics 0205003, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0205003
    Note: Type of Document - pdf; prepared on IBM PC ; to print on Franciscan monk; pages: 35 ; figures: included. This paper was presented at the 2001 NBER summer workshop
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    References listed on IDEAS

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    Cited by:

    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. 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.
    3. John Kennes & Aaron Schiff, 2003. "The Value of a Reputation System," Industrial Organization 0301011, University Library of Munich, Germany.

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    More about this item

    Keywords

    Directed search; wage dispersion; Pissarides; matching technology; heterogeneity; On-the-job search;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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