Premium
Fixed or Flexible? Wage‐setting in Search Equilibrium
Author(s) -
Ellingsen Tore,
Rosén ÅSa
Publication year - 2003
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.t01-1-00281
Subject(s) - wage , economics , negotiation , labour economics , microeconomics , wage bargaining , efficiency wage , general equilibrium theory , political science , law
Why do some vacancies offer a posted wage whereas others offer a negotiable wage? The paper endogenizes the choice of wage policy in a standard sequential search model with heterogeneous workers. In particular, we identify circumstances such that there exists an equilibrium in which all firms negotiate wages. We find that this equilibrium exists if and only if the labour market is sufficiently tight and worker heterogeneity is sufficiently large.