Arbeitspapier
Strategic Wage Setting and Coordination Frictions with Multiple Applications
We examine wage competition in a model where identical workers choose the number of jobs to apply for and identical firms simultaneously post a wage. The Nash equilibrium of this game exhibits the following properties: (i) an equilibrium where workers apply for just one job exhibits unemployment and absence of wage dispersion; (ii) an equilibrium where workers apply for two or for more (but not for all) jobs always exhibits wage dispersion and, typically, unemployment; (iii) the equilibrium wage distribution with a higher vacancy-to-unemployment ratio first-order stochastically dominates the wage distribution with a lower level of labor market tightness; (iv) the average wage is non-monotonic in the number of applications; (v) the equilibrium number of applications is non-monotonic in the vacancy-to-unemployment ratio; (vi) a minimum wage increase can be welfare improving because it compresses the wage distribution and reduces the congestion effects caused by the socially excessive number of applications; and (vii) the only way to obtain efficiency is to impose a mandatory wage that eliminates wage dispersion altogether.
- Language
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Englisch
- Bibliographic citation
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Series: IZA Discussion Papers ; No. 1260
- Classification
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Wirtschaft
Unemployment: Models, Duration, Incidence, and Job Search
Labor Contracts
- Subject
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coordination frictions
internet
job search
minimum wage
wage dispersion
Lohnbildung
Lohnverhandlungen
Nash-Gleichgewicht
Lohnverhandlungstheorie
Arbeitsuche
Theorie
- Event
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Geistige Schöpfung
- (who)
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Gautier, Pieter A.
Moraga-González, José Luis
- Event
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Veröffentlichung
- (who)
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Institute for the Study of Labor (IZA)
- (where)
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Bonn
- (when)
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2004
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Gautier, Pieter A.
- Moraga-González, José Luis
- Institute for the Study of Labor (IZA)
Time of origin
- 2004