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    Worker heterogeneity, intra-firm externalalities and wage compression

    Zoega, Gylfi and Booth, A.L. (2005) Worker heterogeneity, intra-firm externalalities and wage compression. Working Paper. Birkbeck, University of London, London, UK.

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    We develop a model of monopsonistic wage competition with heterogenous worker ability and intra-firm production complementarities. We use this to illustrate the conditions under which: (i) the divergence between wages and productivity is an equilibrium phenomena; and (ii) this divergence is increasing in worker ability. While the first result is well-known, the second is new. It derives from the intra-firm externalities that, it has sometimes been argued, justify a firm's existence. We show how the model can be used to explain a number of empirical regularities that have hitherto been viewed as puzzles. We then confirm the empirical relevance of our model using new establishment-level data.


    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 0515
    Keyword(s) / Subject(s): Heterogeneous workers, hierarchical assignment models, monopsonistic competition, wage compression, intra-Örm externalities
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Administrator
    Date Deposited: 04 Apr 2019 15:27
    Last Modified: 02 Aug 2023 17:50


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