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http://hdl.handle.net/10419/20524
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| Title: | | Strategic Wage Setting and Coordination Frictions with Multiple Applications  |
| Authors: | | Gautier, Pieter A. Moraga-González, José Luis |
| Issue Date: | | 2004 |
| Series/Report no.: | | IZA Discussion paper series 1260 |
| Abstract: | | We examine wage competition in a model where identical workers choose the number of jobs to apply for and identical firms simultaneously post a wage. The Nash equilibrium of this game exhibits the following properties: (i) an equilibrium where workers apply for just one job exhibits unemployment and absence of wage dispersion; (ii) an equilibrium where workers apply for two or for more (but not for all) jobs always exhibits wage dispersion and, typically, unemployment; (iii) the equilibrium wage distribution with a higher vacancy-to-unemployment ratio first-order stochastically dominates the wage distribution with a lower level of labor market tightness; (iv) the average wage is non-monotonic in the number of applications; (v) the equilibrium number of applications is non-monotonic in the vacancy-to-unemployment ratio; (vi) a minimum wage increase can be welfare improving because it compresses the wage distribution and reduces the congestion effects caused by the socially excessive number of applications; and (vii) the only way to obtain efficiency is to impose a mandatory wage that eliminates wage dispersion altogether. |
| Subjects: | | coordination frictions internet job search minimum wage wage dispersion |
| JEL: | | J64 J41 D4 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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| dp1260.pdf | | 2.24 MB | Adobe PDF |
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