Abstract / Description of output
I present a new on-the-job search model with bargaining and renegotiation in which turnover depends on the contracted wage. The paper provide a justification for the use of Nash bargaining in models with on-the-job search. In the model, shorter wage contracts reduce the response of turnover to the contracted wage, reducing a firm’s willingness to increase pay, and thereby the worker’s equilibrium share of the match surplus. The model generates spillover effects from minimum wages due to firms’ incentives to increase contracted wages to reduce turnover. These incentives, and therefore the spillovers, are lower when wage contracts are shorter. Last, I endogenize the frequency of renegotiation, and find that, generically, the equilibrium features infrequently renegotiated wages.
|E-pub ahead of print - 12 Oct 2022
Keywords / Materials (for Non-textual outputs)
- on-the-job search
- wage contracts
- minmum wages
- spillover effects