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Search, Concave Production, and Optimal Firm Size

Smith, E (1994) Search, Concave Production, and Optimal Firm Size. UNSPECIFIED. C.E.P.R. Discussion Papers 882.

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This paper presents a simple search and bargaining economy in which firms use concave production. Because a firm and worker negotiate over the worker's marginal productivity, the firm's wage is a function of its labour force. Reacting to this wage function, firms choose an excessively large and inefficient number of workers. They overemploy, but because too few firms exist in equilibrium, aggregate employment and vacancies are suboptimal. Imposing a fixed exogenous wage, for example by legislating a minimum wage or through union contracting, reduces this inefficiency.

Item Type: Monograph (UNSPECIFIED)
Uncontrolled Keywords: Bargaining; Firm Size; Minimum Wages; Search; Unions
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 29 Jun 2012 11:06
Last Modified: 17 Aug 2017 18:11

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