Persistent Wage Dispersion and Involuntary Unemployment

Abstract

It is costly for firms' offers to workers to be turned down both because firms must make additional offers and making offers is costly and because capital is underused or unused. Provided that workers apply to at least two firms for jobs, there will be wage dispersion in equilibrium, and some workers will randomly fail to receive any wage offers. Firms in the same industry with access to the same technology may nevertheless choose different levels of capital intensity. Firms using capital-intensive technologies will pay higher wages.