Hiring Standards and Labour Market Clearing

17 Pages Posted: 20 May 2005

See all articles by Ekkehart Schlicht

Ekkehart Schlicht

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

Abstract

Consider a labour market with heterogeneous workers. When recruiting workers, firms set a hiring standard and make a wage offer. 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, but - in contrast to other efficiency-wage models - not on the level of unemployment and is, thus, compatible with increasing unemployment as observed, e.g. in Germany.

Suggested Citation

Schlicht, Ekkehart, Hiring Standards and Labour Market Clearing. Metroeconomica, Vol. 56, No. 2, pp. 263-279, May 2005. Available at SSRN: https://ssrn.com/abstract=725915

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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