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IZA
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Hiring Standards and Market Clearing
by
Ekkehart Schlicht
(April 2002)
final version published as 'Hiring Standards and Labor Market Clearing' in: Metroeconomica, 2005, 56(2), 263-279
Abstract:
Consider a labour market with heterogeneous workers. Firms recruit workers by fixing a
hiring standard and a wage offer simultaneously. A more demanding hiring standard
necessitates a better wage offer in order to attract enough qualified applicants. As a result,
an efficiency wage effect is obtained. An equilibrium emerges which does not clear the labour
market. The wage level depends on structural characteristics of labour supply, such as
heterogeneity and mobility of the workers. The model is contrasted with prevailing efficiency
wage theories, and policy implications are also discussed.
Text: See Discussion Paper No. 481 
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