This paper examines the development of wage inequality in the context of a Burdett-Mortensen (1998) model that is extended to incorporate worker heterogeneity through skill requirements in the production process. In this environment, wage dispersion is a natural consequence of firms pursuing...

We examine the implications of worker heterogeneity on the equilibrium matching process, using a directed search model. Worker abilities are selected from a general distribution, subject to some weak regularity requirements, and the firms direct their job offers to workers. We identify...