Equilibrium Unemployment with Wage Posting: Burdett-Mortensen Meet Pissarides
University of Aarhus CLS Working Paper No. 98-014
24 Pages Posted: 25 Aug 1999
Date Written: October 1998
The wage posting approach to search equilibrium is incorporated into the equilibrium unemployment approach in the paper. The unique equilibrium to the wage posting game analyzed is a distribution of wage offers of the same functional form as that originally derived by Burdett and Mortensen (1998). The synthesis is extended by allowing for match specific investment by employers. The outcome is endogenous productivity differences across jobs that are induced by equilibrium wage offer differences. Contrary to the original Burdett-Mortensen solution, the equilibrium wage offers distribution can be unimodal with a long right tail when match-specific investment are included.
JEL Classification: J31, J64, J41, D83
Suggested Citation: Suggested Citation