Selection Wages: An Example

9 Pages Posted: 11 Jan 2007

See all articles by Ekkehart Schlicht

Ekkehart Schlicht

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

Date Written: December 2006


Offering higher wages may enable firms to attract more applicants and screen them more carefully. If firms compete in this way in the labor market, "selection wages" emerge. This note illustrates this wage-setting mechanism. Selection wages may engender unconventional results, such as a pre-tax wage compression induced by the introduction of a progressive wage tax.

Keywords: wage formation, efficiency wage, incentive wage, mobility, job-specific pay, wage-tax

JEL Classification: J31, J41, J62, J63

Suggested Citation

Schlicht, Ekkehart, Selection Wages: An Example (December 2006). IZA Discussion Paper No. 2507. Available at SSRN:

Ekkehart Schlicht (Contact Author)

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

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