Fair Wages When Individual Choice Sets Are Incomplete--An Application of a Model with Indivisibilities.

A model of occupational choice is considered. Due to incomplete and asymmetric information, various individuals have different sets of choice. Conceivable definitions of fair wages are discussed and analyzed. Existence of a fair wage structure is proved in a formal model where occupation is regarded as a large indivisible good. The model is of particular interest for wage setting in the public sector, where the neoclassical relationship between wages and marginal productivity is not always applicable. Copyright 1988 by The editors of the Scandinavian Journal of Economics.