Evidence on the Determinants of the Choice between Wage Posting and Wage Bargaining

39 Pages Posted: 4 Jun 2010 Last revised: 11 Jun 2010

See all articles by Robert E. Hall

Robert E. Hall

Hoover Institution and Department of Economics, Stanford University; National Bureau of Economic Research (NBER)

Alan B. Krueger

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: May 2010

Abstract

Some workers bargain with prospective employers before accepting a job. Others face a posted wage as a take-it-or-leave-it opportunity. Theories of wage formation point to substantial differences in labor-market equilibrium between bargained and posted wages. We surveyed a representative sample of U.S. workers to inquire about the wage determination process at the time they were hired into their current or most recent jobs. A third of the respondents reported bargaining over pay before accepting their current jobs. About a third of workers had precise information about pay when they first met with their employers, a sign of wage posting. About 40 percent of workers could have remained on their earlier jobs at the time they accepted their current jobs, indicating a more favorable bargaining position than is held by unemployed job-seekers. Our analysis of the distribution of wages shows that wage dispersion is higher among workers who bargained for their wages. Wages are higher among bargainers than non-bargainers, after adjusting for the differing compositions of the groups. Our results on wages give substantial support to the job-ladder model--workers who had the option to remain at their earlier jobs when they took their current jobs can earn higher wages than those without that option.

Suggested Citation

Hall, Robert E. and Krueger, Alan B., Evidence on the Determinants of the Choice between Wage Posting and Wage Bargaining (May 2010). NBER Working Paper No. w16033. Available at SSRN: https://ssrn.com/abstract=1617035

Robert E. Hall (Contact Author)

Hoover Institution and Department of Economics, Stanford University ( email )

Stanford, CA 94305-6010
United States
650-723-2215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
650-723-2215 (Phone)

Alan B. Krueger

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4046 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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