Wage Posting or Wage Bargaining? A Test Using Dual Jobholders

Authors

Marta Lachowska, W.E. Upjohn Institute for Employment ResearchFollow
Alexandre Mas, Princeton University and National Bureau of Economic ResearchFollow
Raffaele Saggio, University of British ColumbiaFollow
Stephen A. Woodbury, Michigan State University and W.E. Upjohn Institute for Employment ResearchFollow

Upjohn Author ORCID Identifier

https://orcid.org/0000-0001-9158-2592

https://orcid.org/0000-0002-4474-2415

Publication Date

1-2021

Series

National Bureau of Economic Research Working Paper 28409

Abstract

We employ a revealed-preference test to distinguish between wage posting and wage bargaining in the labor market. Using a sample of dual jobholders in Washington State, we estimate the sensitivity of wages and separation rates to wage shocks in a secondary job. In lower parts of the wage distribution, improvements in the outside option lead to higher separations rates but not to higher wages, consistent with wage posting. In the highest wage quartile, improved outside options translate to higher wages, but not higher separation rates, consistent with bargaining. In the aggregate, bargaining appears to be a limited determinant of wage setting.

Publisher

National Bureau of Economic Research

DOI

10.3386/w28409

Published Version

In Journal of Labor Economics 40: S469–S493

Issue Date

January 2021, Revised December 2021

Subject Areas

LABOR MARKET ISSUES; Employment relationships; Turnover; Wages, health insurance and other benefits