Directed search on the job and the wage ladder

Alain Delacroix, Shouyong Shi

Research output: Contribution to journalArticlepeer-review

24 Scopus citations

Abstract

We model a labor market where employed workers search on the job and firms direct workers' search using wage offers and employment probabilities. Applicants observe all offers and face a trade-off between wage and employment probability. There is wage dispersion among workers, even though all workers and jobs are homogeneous. Equilibrium wages form a ladder, as workers optimally choose to climb the ladder one rung at a time. This is because low-wage applicants are relatively more sensitive to employment probability than to wage and thus forgo the opportunity to apply for a high wage, with a lower chance of success.

Original languageEnglish (US)
Pages (from-to)651-699
Number of pages49
JournalInternational Economic Review
Volume47
Issue number2
DOIs
StatePublished - May 1 2006

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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