Compensating Wage Differentials, Workers' Heterogeneity and Imperfect Competition in the Labor Market
In this paper, we explore a simple model which focuses on the joint role of workers' heterogeneity and imperfect competition in the endogeneous formation of labor market equilibria. We show that, compared to the competitive case, imperfect competition leads to a misallocation of workers and to an increase of the level of unemployment when the population is heterogeneous. When workers are all identical, competitive and Nash allocations become the same.
perfect versus imperfect competition in the labor market; heterogeneous versus homogeneous workers
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