Suphanit Piyapromdee

This article extends a classic on‐the‐job search model of homogeneous workers and firms by introducing a shirking problem. Workers choose their effort levels and search on the job. Firms elicit effort through wages and monitoring; an inverse relationship between wages and monitoring rates is derived. Wages play a dual role by allocating labor supply and motivating employee effort. This gives rise to an equilibrium wage distribution that contrasts with existing literature. In particular, I show that a hump‐shaped and positively skewed wage distribution, as observed empirically, can be derived even when firms and workers are, respectively, identical.

A growing phenomenon in consumer goods markets is the growth of ethical consumption movements, including ‘No Sweat’ campaigns for clothing, environmentally oriented organic food markets, and ‘fair trade’ markets for goods such as coffee. These markets use alternative distribution channels to link consumers with producers who employ particular methods of production. The purpose of alternative channels is typically the mitigation of an apparent market distortion.