Social and Behavioral Sciences Commons^™

The Effects Of Bargaining On Market Outcomes: Evidence From Buyer And Seller Specific Estimates, Subal Kumbhakar, Christopher Parmeter

Christopher F. Parmeter

In this paper we examine wage dispersion in labor markets across currently employed workers. We argue that differences in the potential productivity of a match (typically assumed to be known in the previous literature) generates a surplus between the minimum wage the worker is willing to accept and the maximum wage the firm is willing to offer for the job. Existence of this surplus leads to wage dispersion due to negotiating over the amounts extracted by each agent. Our objective is to estimate the surplus extracted by each firm-worker pair and the effect of the net extracted surplus on the …