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Digitized by the Internet Archive in 2011 with Funding from Boston Library Consortium Iviember Libraries Hb31 .m415 Working Paper Department of Economics ^ Efficient Wage Dispersion
| Content Provider | Semantic Scholar |
|---|---|
| Author | Acemoglu, Daron Shimer, Rober |
| Copyright Year | 2011 |
| Abstract | In market economies, identical workers appear to receive very different wages, violating the 'law of one price' of Walrasian markets. We argue in this paper that in the absence of a Walrasian auctioneer to coordinate trade: (i) wage dispersion among identical workers is very often an equilibrium phenomenon; (ii) such dispersion is necessary for a market economy to function. We analyze an environment in which firms post wages and workers may at a small cost obsei-ve one or more of the posted wages, i.e. search, before deciding where to apply. Both with homogeneous and heterogeneous firms, equilibrium wage dispersion is necessary for the economy to approximate efficiency. Without wage dispersion, workers do not search, and wages are depressed. As a result: (a) there is excessive entry of firms; (b) because in the absence of search, liigh productivity firms cannot attract workers faster than low productivity firms, their relative profitability is reduced, and technology choices are distorted. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://dspace.mit.edu/bitstream/handle/1721.1/63568/efficientwagedis00acem2.pdf?sequence=1 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
