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Wage/Tenure Contracts with Heterogeneous Firms

Burdett, K and Coles, M (2007) Wage/Tenure Contracts with Heterogeneous Firms. UNSPECIFIED. University of Essex, Department of Economics, Discussion Papers 649.


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This paper investigates equilibria in a labor market where heterogeneous firms post wage/tenure contracts and risk-averse workers, both employed and unemployed, search for new job opportunities. Different firms, even those with the same productivity, typically offer different contracts. Equilibrium finds workers never quit from higher productivity firms to lower productivity firms, but turnover is inefficiently low as employees with large tenures at low productivity firms may reject job offers from more productive firms. A worker who quits to a more productive firm may take a wage cut in anticipation of better wage promotion prospects. Wages within a firm might also increase by a discrete amount at the end of an initial 'probationary' spell.

Item Type: Monograph (UNSPECIFIED)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 05 Jan 2013 18:42
Last Modified: 17 Aug 2017 18:04

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