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On the Pure Theory of Wage Dispersion

  • 2017.11.27
  • Event
Speaker: Cheng Wang, Iowa State University & Fudan University

Topic:

On the Pure Theory of Wage Dispersion

 

Time & Date:

10:30am-12:00pm, 2017/12/1

Venue:

Room 502, Daoyuan Building, CUHK(SZ)

Speaker:

Cheng Wang, Iowa State University & Fudan University

Detail:

We develop a pure theory of wage dispersion an equilibrium model of search and on-
the-job search where identical firms offer differential wages/contracts to homogeneous
workers. Jobs are optimal dynamic contracts that allow firms to match the worker's
outside offers or let the job be terminated. Such a model generates distributions of wage
offers that are non-degenerate and unimodal. It can be calibrated to the U.S. labor
market to produce a wage offer dispersion that resembles observations, together with a
distribution in the wages earned that is consistent with data, in both magnitude and
shape. Counteroffers are a key variable in the theory. Too much counteroffering destroys
the dispersion in wages offered, but too little of it renders the theory not being able to
explain the observed distribution of wages earned.