2024/11/08 by Francesco Del Prato, Marc Fleurbaey, Del Prato, Francesco +1
Social Sciences · #Digital Economy and Work Transformation #FOS: Economics and business #General Economics (econ.GN) #Labor Movements and Unions
paper · pdf · doi:10.48550/arxiv.2411.05567
openalex publication_date 2024/11/08 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
What happens when employers value worker welfare in frictional labor markets? We show this "responsibility" creates an endogenous wedge in the marginal labor cost -- akin to a hiring subsidy -- altering wage and vacancy incentives rather than only changing the surplus split. The wedge is strongest when outside options are weak and separations rare, implying larger wage premia in slack, low-mobility markets. In a wage-posting model with on-the-job search, responsible firms may occupy the high-wage segment even when less productive. In a DMP model, responsible firms commit to higher worker bargaining power, raising the value of unemployment and thereby wages at regular firms.