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| Author: | Shi, S. |
| Title: | Product market and the size-wage differential |
| Journal: | International Economic Review
2002 : FEB, VOL. 43:1, p. 21-54 |
| Index terms: | Product policy Payment systems Pay differentials Market efficiency |
| Freeterms: | Wage differentials |
| Language: | eng |
| Abstract: | Using directed search to model the product market and the labour market, the author shows that large plants can pay higher wages to homogenous workers and earn higher expected profit per worker than small plants, although plants are identical except size. A large plant charges a higher price for its product and compensates buyers with a higher service probability. The size-wage differential increases with the product demand when demand is initially low and falls when demand is already high. |
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