Alternative theories of wage dispersion

Parution :

European Economic Review 2006, 50(4) p : 831-848 (a)
Article reproduit dans the Elsevier’s series on ’Contributions to Economic Analysis’ intitulé ”Models of Wage and Employment Dynamics”2006.

Auteur(s) :

Damien Gaumont, Martin Schindler Randall Wright

We analyze labor market models where the law of one price fails—i.e., models with equilibrium wage dispersion. We begin considering ex ante heterogeneous workers, but highlight a problem with this approach : If search is costly the market shuts down. We then assume homogeneous workers but ex post heterogeneous matches. This model is robust to search costs, and delivers equilibrium wage dispersion. However, we prove that the law of two prices holds : Equilibrium implies at most two wages. We explore other models, including one combining ex ante and ex post heterogeneity which is robust and delivers more realistic wage dispersion.