Consider a labour market with heterogeneous workers. Firms recruit workers by fixing a hiring standard and a wage offer simultaneously. A more demanding hiring standard necessitates a better wage offer in order to attract enough qualified applicants. As a result, an efficiency wage effect is...

Recent empirical work has shown that there exists a negative relation between wages and unemployment estimated across regions. Our model recognises the spatial dimension of the so-called wage curve by using a Hotelling/Salop framework in which a finite number of firms compete for heterogeneous...