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Description - Wage Dispersion by Dale T. Mortensen

Why are workers with identical skills found in both "good" jobs and "bad" jobs? Why are workers who do similar jobs paid differently, contrary to standard competitive theory? Observable differences in workers doing the same job account for only 30 percent of wage variation. In Wage Dispersion Dale Mortensen examines the reasons for pay differentials in the other 70 percent. He finds that these differentials, or wage dispersion, are largely the result of job search friction (which arises when workers do not know the wages offered by all employers) and cross-firm differences in wage policy and productivity. Mortensen examines previous theoretical explanations for wage dispersion, testing them against data from a Danish matched employer-employee database. He begins by offering a simple one-period model of the problem, then expands this basic model intertemporally to include the role of on-the-job worker search behavior. Following this, he discusses theoretical modifications that offer an explanation for the nature of observed wage dispersion, particularly the shape of cross-firm wage distribution. He then examines the hypothesis that wage policies are determined by profit-maximizing behavior. Finally, he reviews recent work that extends the basic theoretical framework to explain wage dispersion within firms.

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Book Details

ISBN: 9780262633192
ISBN-10: 0262633191
Format: Paperback
(229mm x 152mm x 13mm)
Pages: 160
Imprint: MIT Press
Publisher: MIT Press Ltd
Publish Date: 14-Jan-2005
Country of Publication: United States

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Author Biography - Dale T. Mortensen

Dale Mortensen is Ida C. Cook Professor of Economics, a former Chairman of the Economics Department, and Director of the Mathematical Methods in the Social Sciences Program at Northwestern University. He is a founding editor of the Review of Economic Dynamics and a Fellow of the Econometrics Society and the American Academy of Arts and Sciences. He received the 2010 Nobel Prize in Economics.

Books By Dale T. Mortensen