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Residual Wage Dispersion with Efficiency Wages

Piyapromdee, S; (2018) Residual Wage Dispersion with Efficiency Wages. International Economic Review 10.1111/iere.12305. (In press).

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Abstract

This article extends a classic on‐the‐job search model of homogeneous workers and firms by introducing a shirking problem. Workers choose their effort levels and search on the job. Firms elicit effort through wages and monitoring; an inverse relationship between wages and monitoring rates is derived. Wages play a dual role by allocating labor supply and motivating employee effort. This gives rise to an equilibrium wage distribution that contrasts with existing literature. In particular, I show that a hump‐shaped and positively skewed wage distribution, as observed empirically, can be derived even when firms and workers are, respectively, identical.

Type: Article
Title: Residual Wage Dispersion with Efficiency Wages
DOI: 10.1111/iere.12305
Publisher version: https://doi.org/10.1111/iere.12305
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1568345
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