The immobile incumbent problem in a model of short-term wage-posting

Manning, Alan ORCID: 0000-0002-7884-3580 (2025) The immobile incumbent problem in a model of short-term wage-posting. German Economic Review. ISSN 1468-0475

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Abstract

This paper takes the canonical Burdett-Mortensen model of wage-posting and relaxes the assumption that wages are set once-for-all, instead assuming they can only be committed one period at a time. It derives a closed-form solution for a steady-state Markov Rank-Preserving Equilibrium and shows how this relates to the canonical model and performs some comparative statics on it. But it is shown that a Rank-Preserving Equilibrium may fail to exist because employers have more monopsony power over existing workers than new recruits and that this non-existence can be a problem for plausible parameter values. It is shown how a Rank-Inverting Equilibrium may exist. It is argued that this problem is likely to occur in a wide range of search models.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	Economics
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HB Economic Theory
Date Deposited:	03 Mar 2025 14:54
Last Modified:	08 May 2025 17:24
URI:	http://eprints.lse.ac.uk/id/eprint/127471

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