Equilibrium wage dispersion, firm size, and growth

This paper analyzes a model of equilibrium wage dynamics and wage dispersio n across firms. It considers a labor market where firms set wages and worke rs use on-the-job search to look for better paid work. It analyzes a perfec t equilibrium where each firm can change its wage paid at any time, and wor kers use optimal quit strategies. Firms trade off higher wages against a lo wer quit rate, and large firms (those with more employees) always pay highe r wages than small firms. Non-steady-state dispersed price equilibria are a lso analyzed, which describe how wages vary as each firm and the industry a s a whole grow over time. (C) 2001 Academic Press.