Note on the Determinants of Wage Dispersion

The purpose of this note is to explain theoretically the observed entire density of wages which is hump-shaped and right-skewed. I extend the model brought up by Halko et al . (2008) to introduce heterogeneity of firmfs productivity. It causes a difference in the support of wage offers, a wider (narrower) range for high (low) productivity firms. The different support roughly results in the observed wage dispersion because low wage offers are made by all firms (right-skewed), whereas high wage offers are made by only high producivity firms.