Hiring Standards and Market Clearing

22 Pages Posted: 27 May 2002

See all articles by Ekkehart Schlicht

Ekkehart Schlicht

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

Date Written: April 2002

Abstract

Consider a labour market with heterogeneous workers. Firms recruit workers by fixing a hiring standard and a wage offer simultaneously. A more demanding hiring standard necessitates a better wage offer in order to attract enough qualified applicants. As a result, an efficiency wage effect is obtained. An equilibrium emerges which does not clear the labour market. The wage level depends on structural characteristics of labour supply, such as heterogeneity and mobility of the workers. The model is contrasted with prevailing efficiency wage theories, and policy implications are also discussed.

Keywords: Wage Formation, Hiring Standards, Efficiency Wages, Unemployment

JEL Classification: J31, J41

Suggested Citation

Schlicht, Ekkehart, Hiring Standards and Market Clearing (April 2002). IZA Discussion Paper No. 481. Available at SSRN: https://ssrn.com/abstract=310367

Ekkehart Schlicht (Contact Author)

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

IZA Institute of Labor Economics

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

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