Wage competition with heterogeneous workers and firms

Jonathan Hamilton, Jacques François Thisse, Yves Zenou

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32 Citations (Scopus)


We study imperfect competition in the labor market when both workers and firms are heterogeneous. When firms cannot observe workers' skill, firms pay workers equal wages, but workers absorb training costs. When firms can identify worker types, firms pay different net wages to different workers. Voters select the level of general education that is financed by a lump-sum tax. Workers are on average better off when firms can observe workers' skill for a given level of general human capital, but the median voter prefers a higher level of general human capital when firms cannot observe worker types.

Original languageEnglish
Pages (from-to)453-472
Number of pages20
JournalJournal of Labor Economics
Issue number3
Publication statusPublished - 1 Jul 2000
Externally publishedYes

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