Working Paper: NBER ID: w13755
Authors: Julio J. Rotemberg
Abstract: This paper presents a model in which firms recruit both unemployed and employed workers by posting vacancies. Firms act monopsonistically and set wages to retain their existing workers as well as to attract new ones. The model differs from Burdett and Mortensen (1998) in that its assumptions ensure that there is an equilibrium where all firms pay the same wage. The paper analyzes the response of this wage to exogenous changes in the marginal revenue product of labor. The paper finds parameters for which the response of wages is modest relative to the response of employment, as appears to be the case in U.S. data and shows that the insistence by workers that firms act with a minimal level of altruism can be a source of dampened wage responses. The paper also considers a setting where this minimal level of altruism is subject to fluctuations and shows that, for certain parameters, the model can explain both the standard deviations of employment and wages and the correlation between these two series over time.
Keywords: Altruism; Wages; Unemployment; Labor Market; Matching Model
JEL Codes: D64; E24; J30; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Altruism (D64) | Wages (J31) |
| Altruism (D64) | Employment (J68) |
| Marginal Revenue Product of Labor (J49) | Wages (J31) |
| Worker Perception of Altruism (D64) | Wages (J31) |
| Altruism Fluctuations (D64) | Employment (J68) |
| Altruism Fluctuations (D64) | Wages (J31) |