๐”– Bobbio Scriptorium
โœฆ   LIBER   โœฆ

Interdependent Preferences and the Competitive Wage Structure

โœ Scribed by Robert H. Frank


Book ID
124749368
Publisher
The RAND Corporation
Year
1984
Tongue
English
Weight
277 KB
Volume
15
Category
Article
ISSN
0741-6261

No coin nor oath required. For personal study only.

โœฆ Synopsis


This article shows by example that when workers care about relative income and are free to choose their coworkers, the equilibrium distribution of wages within firms must be less dispersed than the corresponding distribution of marginal products. An implicit market for within-firm status is shown to produce welfare gains by sorting workers among firms in accordance with how much they are willing to pay for high rank. The resulting equilibrium Pareto dominates allocations in which each worker is paid his marginal product.


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