Wage and technology dispersion with wage bargaining By

1 We study endogenous wage and productivity distributions with individual ex post (Nash) wage bargaining between workers and firms. We concentrate on a matching technology with directed search and firms make at most one offer per job opening. A “low-wage equilibrium” (LWE) where there is full employment, all workers search one firm, wage and productivity collapse to single points but workers still earn rents, always exists when workers ’ bargaining power is not too high. A dispersion equilibrium also exists when marginal search costs for workers are low. Here the number of jobs is less than the number of workers ’ search messages, and each worker may search several firms. The dispersion equilibrium is often but not necessarily more efficient than the LWE. Key words: Wage distributions; wage bargaining; sequential search; investment choices