Equilibrium Wage Dispersion : An Example

Author/Editor:

International Monetary Fund

Publication Date:

January 1, 2006

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Search models with posting and match-specific heterogeneity generate wage dispersion. Given K values for the match-specific variable, it is known that there are K reservation wages that could be posted, but generically never more than two actually are posted in equilibrium. What is unknown is when we get two wages, and which wages are actually posted. For an example with K = 3, we show equilibrium is unique; may have one wage or two; and when there are two, the equilibrium can display any combination of posted reservation wages, depending on parameters. We also show how wages, profits, and unemployment depend on productivity.

Series:

Working Paper No. 06/19

Subject:

English

Publication Date:

January 1, 2006

ISBN/ISSN:

9781451862799/1018-5941

Stock No:

WPIEA2006019

Format:

Paper

Pages:

16

Please address any questions about this title to publications@imf.org