Abstract
Fairness considerations in wage setting can improve the ability of the Diamond-Mortensen-Pissarides search and matching model to account for U.S. labor market dynamics. Firms’ production is influenced by workers’ effort input, which depends on whether workers consider the employment relation as fair. A typical worker’s effort is determined in a comparison of individual current wage with wage norms, including the outside option, the individual past wage, and the wage level in the steady state. The fairness considerations in the search framework give rise to endogenous real wage rigidity, and realistic volatilities of unemployment, vacancies,
and labor market tightness.
and labor market tightness.
| Original language | English |
|---|---|
| Pages (from-to) | 1336-1349 |
| Journal | Economic Inquiry |
| Volume | 55 |
| Issue number | 3 |
| Early online date | 17 Feb 2017 |
| DOIs | |
| Publication status | Published - 29 May 2017 |
Keywords
- Search and matching frictions
- Fair wage
- Real wage rigidity
- Unemployment
Access to Document
- Kuang_&_Wang_Labor_market_dynamics_with_searching_frictions_and_fair_wage_considerations_Economic_inquiry
Checked 16/11/2016 This is the peer reviewed version of the following article: Kuang, P. and Wang, T. (2017), LABOR MARKET DYNAMICS WITH SEARCH FRICTIONS AND FAIR WAGE CONSIDERATIONS. Econ Inq, 55: 1336–1349.which has been published in final form at 10.1111/ecin.12428. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.