Booth, Alison L and Zoega, Gylfi (2005) Worker Heterogeneity, Intra-firm Externalities and Wage Compression. Working Paper. Birkbeck Working Papers in Economics and Finance 0515.
Booth, Alison L and Zoega, Gylfi (2005) Worker Heterogeneity, Intra-firm Externalities and Wage Compression. Working Paper. Birkbeck Working Papers in Economics and Finance 0515.
Booth, Alison L and Zoega, Gylfi (2005) Worker Heterogeneity, Intra-firm Externalities and Wage Compression. Working Paper. Birkbeck Working Papers in Economics and Finance 0515.
Abstract
We develop a model of monopsonistic wage competition with heterogenous worker ability and intra-firm production complementarities. We use this to illustrate the conditions under which: (i) the divergence between wages and productivity is an equilibrium phenomena; and (ii) this divergence is increasing in worker ability. While the first result is well-known, the second is new. It derives from the intra-firm externalities that, it has sometimes been argued, justify a firm's existence. We show how the model can be used to explain a number of empirical regularities that have hitherto been viewed as puzzles. We then confirm the empirical relevance of our model using new establishment-level data.
Item Type: | Monograph (Working Paper) |
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Uncontrolled Keywords: | Heterogeneous workers; hierarchical assignment models; monopsonistic competition; wage compression; |
Subjects: | H Social Sciences > HB Economic Theory |
Divisions: | Faculty of Social Sciences > Economics, Department of |
Depositing User: | Jim Jamieson |
Date Deposited: | 18 Jul 2012 12:17 |
Last Modified: | 18 Jul 2012 12:17 |
URI: | http://repository.essex.ac.uk/id/eprint/3139 |