Premium
The Distribution of Earnings in an Equilibrium Search Model with State‐Dependent Offers and Counteroffers *
Author(s) -
PostelVinay Fabien,
Robin JeanMarc
Publication year - 2002
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00045
Subject(s) - wage dispersion , earnings , productivity , wage , economics , ex ante , dispersion (optics) , distribution (mathematics) , labour economics , homogeneous , efficiency wage , general equilibrium theory , construct (python library) , microeconomics , econometrics , macroeconomics , computer science , finance , mathematics , mathematical analysis , programming language , physics , optics , combinatorics
We construct an equilibrium job search model with on‐the‐job search in which firms implement optimal‐wage strategies under full information in the sense that they leave no rent to their employees and counter the offers received by their employees from competing firms. Productivity dispersion across firms results in wage mobility both within and across firms. Workers may accept wage cuts to move to firms offering higher future wage prospects. Equilibrium productivity dispersion across ex ante homogeneous firms can be endogenously generated. Productivity dispersion then generates a nontrivial wage distribution which is generically thin‐tailed, as typically observed in the data.