Wage Determination and Efficiency in Search Equilibrium
Review of Economic Studies
1982
Using a simple search technology and the Nash bargaining solution, the paper derives the steady state equilibrium negotiated wage as a function of the equilibrium unemployment and vacancy rates. For this wage, the lifetime expected present discounted value of earnings of a new worker is compared with the social marginal product of a new worker. These are not generally equal implying inefficient incentives for labour mobility.
- DOI
- 10.2307/2297271
- Volume
- 49 (2)
- Pages
- 217
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