Working Paper: NBER ID: w28409
Authors: Marta Lachowska; Alexandre Mas; Raffaele Saggio; Stephen A. Woodbury
Abstract: We employ a revealed-preference test to distinguish between wage posting and wage bargaining in the labor market. Using a sample of dual jobholders in Washington State, we estimate the sensitivity of wages and separation rates to wage shocks in a secondary job. In lower parts of the wage distribution, improvements in the outside option lead to higher separations rates but not to higher wages, consistent with wage posting. In the highest wage quartile, improved outside options translate to higher wages, but not higher separation rates, consistent with bargaining. In the aggregate, bargaining appears to be a limited determinant of wage setting.
Keywords: wage posting; wage bargaining; dual jobholders; labor market
JEL Codes: J0; J2; J3; J41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improvements in outside options (D89) | Higher separation rates (J12) |
| Improvements in outside options (D89) | Higher wages for workers in the highest wage quartile (J39) |
| Improved outside options (D79) | Higher wages without an increase in separation rates for highest wage quartile (J39) |
| Bargaining (C78) | Wage setting for higher-income workers (J31) |
| Bargaining (C78) | Limited role in wage setting among lower-skilled workers (F66) |