The Immobile Incumbent Problem in a Model of Short-Term Wage-Posting
Year: 2025
Type: article
Abstract: This paper takes the canonical Burdett-Mortensen model of wage-posting and relaxes the assumption that wages are set once-for-all, instead assuming they can only be committed one period at a time. It derives a closed-form solution for a steady-state Markov Rank-Preserving Equilibrium and shows how this relates to the canonical model and performs some comparative statics on it. But it is shown that a Rank-Preserving Equilibrium may fail to exist because employers have more monopsony power over existing workers than new recruits and that this non-existence can be a problem for plausible parameter values. It is shown how a Rank-Inverting Equilibrium may exist. It is argued that this problem is likely to occur in a wide range of search models.
Source: German Economic Review
Author: Alan Manning
Institution: London School of Economics and Political Science
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid:
Award: G2807500881
OpenAlex ID: W4408680999