The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers

28 Pages Posted: 5 Jan 2003

See all articles by Fabien Postel-Vinay

Fabien Postel-Vinay

University of Bristol; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Centre for Structural Econometrics (CSE)

Jean-Marc Robin

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); French National Institute for Agricultural Research (INRA); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Abstract

We construct an equilibrium job search model with on-the-job search in which firms implement optimal-wage strategies under full information in the sense that they leave no rent to their employees and counter the offers received by their employees from competing firms. Productivity dispersion across firms results in wage mobility both within and across firms. Workers may accept wage cuts to move to firms offering higher future wage prospects. Equilibrium productivity dispersion across ex ante homogeneous firms can be endogenously generated. Productivity dispersion then generates a nontrivial wage distribution which is generically thin-tailed, as typically observed in the data.

Suggested Citation

Postel-Vinay, Fabien and Robin, Jean-Marc, The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers. Available at SSRN: https://ssrn.com/abstract=342744

Fabien Postel-Vinay (Contact Author)

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Centre for Structural Econometrics (CSE) ( email )

Department of Economics, University of Bristol
8 Woodland Road
Bristol, BS8 1TN
United Kingdom

Jean-Marc Robin

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA) ( email )

48 boulevard Jourdan
75014 Paris
France
+33 1 4313 6365 (Phone)
+33 1 4313 6362 (Fax)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

15 Boulevard Gabriel Peri
15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

French National Institute for Agricultural Research (INRA)

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

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