Equilibrium Unemployment with Wage Posting: Burdett-Mortensen Meet Pissarides

University of Aarhus CLS Working Paper No. 98-014

24 Pages Posted: 25 Aug 1999

See all articles by Dale T. Mortensen

Dale T. Mortensen

Northwestern University - Department of Economics; IZA Institute of Labor Economics

Date Written: October 1998

Abstract

The wage posting approach to search equilibrium is incorporated into the equilibrium unemployment approach in the paper. The unique equilibrium to the wage posting game analyzed is a distribution of wage offers of the same functional form as that originally derived by Burdett and Mortensen (1998). The synthesis is extended by allowing for match specific investment by employers. The outcome is endogenous productivity differences across jobs that are induced by equilibrium wage offer differences. Contrary to the original Burdett-Mortensen solution, the equilibrium wage offers distribution can be unimodal with a long right tail when match-specific investment are included.

JEL Classification: J31, J64, J41, D83

Suggested Citation

Mortensen, Dale T., Equilibrium Unemployment with Wage Posting: Burdett-Mortensen Meet Pissarides (October 1998). University of Aarhus CLS Working Paper No. 98-014. Available at SSRN: https://ssrn.com/abstract=176069 or http://dx.doi.org/10.2139/ssrn.176069

Dale T. Mortensen (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8230 (Phone)
847-491-7001 (Fax)

IZA Institute of Labor Economics

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

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