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Search Intensity, Directed Search, And The Wage Distribution

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  • Bruno Decreuse
  • André Zylberberg

Abstract

We propose a search equilibrium model in which homogenous rms post wages along with a vacancy to attract job-seekers, while homogenous unemployed workers invest in costly job-seeking. The key innovation relies on the organization of the search market and the search behavior of the job-seekers. The search market is continuously segmented by wage level, individuals can spread their search investment over the di¤erent sub-markets, and search intensity has marginal decreasing returns on each sub-market. We show that there exists a non-degenerate equilibrium wage distribution. The density of this wage distribution is increasing at low wages, and decreasing at high wages. Under additional restrictions, it is hump-shaped, and it can be right-tailed. Our results are illustrated by an example originating a Beta wage distribution.

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Bibliographic Info

Article provided by European Economic Association in its journal Journal of the European Economic Association.

Volume (Year): 9 (2011)
Issue (Month): 6 (December)
Pages: 1168-1186

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Handle: RePEc:bla:jeurec:v:9:y:2011:i:6:p:1168-1186

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  1. Gautier, Pieter A, 2002. "Unemployment and Search Externalities in a Model with Heterogeneous Jobs and Workers," Economica, London School of Economics and Political Science, vol. 69(273), pages 21-40, February.
  2. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers 155908, Institut National de la Recherche Agronomique, France.
  3. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  4. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, vol. 109(456), pages F283-306, June.
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  8. Alain Delacroix & Shouyong Shi, 2006. "Directed Search On The Job And The Wage Ladder," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 651-699, 05.
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  10. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
  11. Bruno Decreuse, 2008. "Choosy Search And The Mismatch Of Talents," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 1067-1089, 08.
  12. Moscarini, Giuseppe, 2001. "Excess Worker Reallocation," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 593-612, July.
  13. Marja-Liisa Halko & Klaus Kultti & and Juha Virrankoski, 2008. "Search Direction And Wage Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 111-134, 02.
  14. Acemoglu, D. & Shimer, R., 1997. "Efficient Unemployment Insurance," Working papers 97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Berg, G.J. & Ridder, G., 1993. "An empirical equilibrium search model of the labour market," Serie Research Memoranda 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  16. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
  17. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  18. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
  19. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
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