Thursday 19 September 16:00-17:00

Wage Dispersion from the Cost of Routine: the Role of Workers’ Social Networks

(joint work with Samuel Danthine, Ensai Rennes)

Noemí Navarro, Université de Rennes

Abstract:

The degree of wage dispersion present in labor markets has long been a puzzle in labor economics. Following Mortensen (2005), wage dispersion refers to the wage differences that observably identical workers face. We introduce a new mechanism that allows to generate wage dispersion, the cost of routine. We present a stylized model of the job market where identical workers do not know the salary offered by identical firms (but have an a priori about them). Workers can remain in employment with the firm first sampled, or leave and search for a different firm. A wage differential emerges in equilibrium if workers have a cost of staying in the same firm (e.g. cost of routine). We then use the model to analyze the effects of workers’ social networks on wage dispersion. In particular, we find that wage dispersion is higher when the degree distribution of the workers’ social network shifts in the sense of (first-order or second-order) stochastic dominance (comparative statics).

Registration, please contact robin@em-lyon.com

Room Roland Calori, B3, Lyon campus