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Wages and Employment with Firm-Specific Seniority
Yannis M. Ioannides and Christopher A. Pissarides
The Bell Journal of Economics
Vol. 14, No. 2 (Autumn, 1983), pp. 573-580
Published by: RAND Corporation
Stable URL: http://www.jstor.org/stable/3003658
Page Count: 8
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We examine wages and employment for junior and senior workers when seniority is firm-specific. We show that if workers are risk averse, the firm chooses both the junior and senior wage independently of the wage offers received by its workers from other firms. Junior workers are paid less than the value of their marginal product and senior workers are paid more. If the firm can monitor its workers' outside offers, it will choose to lay off workers with good offers, but which, nevertheless, may not be so good as its own senior wage.
The Bell Journal of Economics © 1983 RAND Corporation