Job Rents in a Stylized Labor Market

by Ekkehart Schlicht

in:

Beiträge zur Mikro- und Makroökonomik, Festschrift für Hans-Jürgen Ramser,
edited by S. K. Berninghaus und M. Braulke,
Berlin et al., Springer-Verlag 2001, 409-423.

Abstract

Wage formation is often analyzed by assuming that wage differentials reflect productivity differentials intrinsic to the workers, like differences in skill or qualification. Observed industry and firm effects on wages suggests, however, that wage differentials may result from causes rather unrelated to intrinsic productivity. This paper considers the polar case of homogeneous

labor. The wage differentials emerging here are, thus, unrelated to individual differences. The model used is of an economy with a segmented labor market in which the primary sector industries are characterized by high turnover costs. This induces firms to pay efficiency wages reflecting turnover costs. The turnover case offers some  rather surprising yet straightforward conclusions regarding efficiency, discrimination and taxation: Workers capture job rents; wage dispersion is too high; considerable wage differentials may arise from infinitesimally small differences in productivity; and a progressive wage tax will be welfare-enhancing.

Keywords: Job rents, dual labor markets, segmented labor markets, efficiency wages, labor turnover, discrimination, wage tax

Journal of Economic Literature classification numbers:  J31, J41, J63, J71, H21, H24

Professor Dr. Ekkehart Schlicht: Veröffentlichungen/Publications

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