A Range Theory of Wage Differentials

Abstract

The unsatisfactory nature of traditional wage theory as an explanation for interfirm differences in wages is probably so well known as to need no comment. Less obvious, however, has been the nature of the analysis that could be substituted in its place. Drawing upon the empirical studies of labor markets made by, among others, Myers, Shister, Reynolds, Shultz, and himself, Professor Lester advances the hypothesis that theoretical analysis of wage structures must recognize and explain a range of wage rates as the normal characteristic of the labor market, rather than the one rate postulated by older theory as the sine qua non of equilibrium. Richard A. Lester is professor of economics, Princeton University. (Author's abstract courtesy EBSCO.)

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