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Job matching and the distribution of producer surplus

By G. Bertola and Leonardo Felli

Abstract

We study wage determination in the Jovanovic model of matching, relaxing the standard assumption that wages continuously adjust to reflect on-the-job performance and studying aggregation of ex-ante heterogeneous career paths. We assume that workers have no bargaining power and consider an equilibrium where individual workers' age-earnings profiles are piecewise constant, reflecting their outside earning opportunities at each point in time. Turnover results from employers' firing decisions rather than from workers' quitting decisions, and the equilibrium delivers realistic cross-sectional and time-series implications. Employees receive only a portion rather than the whole of the ex-ante producer's surplus from established matches, and have individual incentives to lobby for increased job security. Inefficiently low aggregate turnover may result if such lobbying efforts are successful

Topics: HB Economic Theory
Publisher: Elsevier
Year: 1993
DOI identifier: 10.1016/0035-5054(93)90025-X
OAI identifier: oai:eprints.lse.ac.uk:4678
Provided by: LSE Research Online
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