Wage Bargaining in a Multiple Application Search Model with Recall (original) (raw)

Wage Bargaining with On-the-Job Search: Theory and Evidence

Econometrica, 2006

Most applications of Nash bargaining over wages ignore between-employer competition for labor services and attribute all of the workers' rent to their bargaining power. In this paper, we write and estimate an equilibrium model with strategic wage bargaining and on-the-job search and use it to take another look at the determinants of wages in France. There are three essential determinants of wages in our model: productivity, competition between employers resulting from on-the-job search, and the workers' bargaining power. We find that between-firm competition matters a lot in the determination of wages, because it is quantitatively more important than wage bargaining a la Nash in raising wages above the workers' "reservation wages," defined as out-of-work income. In particular, we detect no significant bargaining power for intermediate-and low-skilled workers, and a modestly positive bargaining power for high-skilled workers.

Wage offers and on‐the‐job search

Canadian Journal of Economics/Revue canadienne d'économique

We study the wage-setting problem of an employer with private information about demand for its product when workers can engage in costly on-the-job search. Employers understand that low wage offers may convey bad news that induces workers to search. The unique perfect sequential equilibrium wage strategy is characterized by: (i) pooling by intermediate-revenue employers on a common wage that just deters search; (ii) discontinuously lower revealing offers by low-revenue employers for whom the benefit of deterring search fails to warrant the required high pooling wage; and (iii) high revealing offers by high-revenue employers seeking to deter aggressive raiders.

Discrimination in the Equilibrium Search Model with Wage

2010

We extend the Burdett and Coles (2003) search model with wage-tenure contracts to two types of workers and firms and derive the equilibrium earnings distributions for both types of workers, by means of which we succeed in predicting many stylized facts found in empirics. For example, we find that at the same wage level, majority workers almost always experience a faster wage increase than the minority workers; minority workers have a higher unemployment rate; discriminating firms make lower profit than non-discriminating firms and offers to minority workers by non-discriminating firms are consistently superior to those provided by discriminating firms etc. Besides, we find a similar result to the classical discrimination theory that the average wage of the majority workers, though higher in most cases, can be smaller than their counterpart's wage when the fraction of discriminating firms is small and the degree of recruiting discrimination and disutility are mild. We also show that in a special case of CRRA utility function with the coefficient of relative risk aversion approaching infinity, our model degenerates to Bowlus and Eckstein (2002).

Chapter 39 New developments in models of search in the labor market

Handbook of Labor Economics, 1999

JEL codes 1 Introduction 2 Modeling markets with friction 2.1 The stopping problem 2.2 Two-sided search and wage determination 2.3 Matching technology 2.4 Search equilibrium 3 Equilibrium u n e m p l o y m e n t 3.1 Exogenous job destruction 3.2 Job and worker flows 3.3 Social efficiency 4 Alternative models of w a g e determination 4.1 Competitive search equilibrium 4.2 Monopoly union 4.3 Strategic bilateral bargaining 4.4 Rent sharing with turnover costs 4.5 Insider wage 4.6 Efficiency wage 5 Labor market policy analysis 5.1 Modeling labor market policy 5.2 The qualitative effects of policy 5.3 The quantitative effects of policy 5.4 A call for research 6 W a g e posting games 6.1 The Diamond paradox 6.2 Wage dispersion: differential costs of search 6.3 Wage dispersion: more than one offer

Simultaneous search with heterogeneous firms and ex post competition

Labour Economics, 2009

We study a search model where workers can apply to high and or low productivity firms. Firms that compete for the same candidate can increase their wage offers as often as they like. We show that if workers apply to two jobs that there is a unique symmetric equilibrium where workers mix between sending both applications to the high and both to the low productivity sector. Efficiency requires however that they apply to both sectors because a higher matching rate in the high-productivity sector can then be realized with fewer applications (and consequently fewer coordination frictions) if workers always accept the offer of the most productive sector. However, in the market the worker's payoff is determined by the second highest offer. This is what prevents them from applying to both sectors. For many configurations, the equilibrium outcomes are the same under directed and random search. Allowing for free entry creates a second source of inefficiency. We discuss the effects of increasing the number of applications and show that our results can easily be generalized to N-firms. JEL codes: D83, E24, J23, J24, J64

Wage Bargaining with On-the-job Search: A Structural Econometric Model

2002

We write and estimate an equilibrium model with strategic wage bargaining and on-the-job search and use it to take another look at the determinants of wages in France. There are three essential determinants of wages in our model: productivity, competition between employers resulting from on-the-job search, and the workers' bargaining power. We find that between-firm competition matters a lot in the determination of wages. In particular, we detect no significant bargaining power for unskilled workers. However, inter-industry differentials are mainly due to differences in productivity, and bargaining power, in the case of skilled workers.

Multi-Levels Bargaining and Efficiency in Search Economies

In this note, we extend the traditional search and matching framework to take account of the different levels at which negotiations take place. We show that, in the absence of any distortion, sector-level bargaining ought to be less efficient than bargaining taking place at the other levels. It follows that the introduction of labor market policies as a combination of employment protection, hiring subsidy and payroll tax improves efficiency. This result suggests that the relationship between the level at which bargaining takes place and the labor market performance is far more conditional than most studies acknowledge.