Journal Article

Wage-Tenure Contracts in a Frictional Labour Market: Firms' Strategies for Recruitment and Retention

Margaret Stevens

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 71, issue 2, pages 535-551
Published in print April 2004 | ISSN: 0034-6527
Published online April 2004 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/0034-6527.00295
Wage-Tenure Contracts in a Frictional Labour Market: Firms' Strategies for Recruitment and Retention

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  • Particular Labour Markets
  • Wages, Compensation, and Labour Costs
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A common assumption in equilibrium search and matching models of the labour market is that each firm posts a wage, to be paid to any worker hired. This paper considers the implications of firms posting contracts, in a random matching model with on-the-job search. More complex contracts enable firms to address both recruitment and retention problems by, for example, increasing the wage with tenure. The effect on the labour market is to reduce turnover, below the level required for efficient matching of workers to firms.

Keywords: J31; J41; M51; M52

Journal Article.  8827 words.  Illustrated.

Subjects: Particular Labour Markets ; Wages, Compensation, and Labour Costs ; Economics

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