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Residual Wage Disparity And Coordination Unemployment

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  • Benoit Julien
  • John Kennes
  • Ian King

Abstract

How much of residual wage dispersion can be explained by an absence of coordination among firms? To answer, we construct a dynamic directed search model with identical workers where firms can create high- or low-productivity jobs and are uncoordinated in their offers to workers, calibrated to the U.S. economy. Workers can exploit ex post opportunities once approached by firms, and can conduct on-the-job search. The stationary equilibrium wage distribution is hump-shaped, skewed significantly to the right, and, with baseline parameters, generates residual dispersion statistics 75-90% of those found empirically. However, the model underestimates the average duration of unemployment. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 47 (2006)
Issue (Month): 3 (08)
Pages: 961-989

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Handle: RePEc:ier:iecrev:v:47:y:2006:i:3:p:961-989

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Cited by:
  1. Lawrence Uren & Ian King & Suren Basov, 2011. "The Employed, the Unemployed, and the Unemployable: Directed Search with Worker Heterogeneity," 2011 Meeting Papers 292, Society for Economic Dynamics.
  2. Aaron Schiff & Martin Browning & John Kennes, 2005. "Lots of Heterogeneity in a Matching Model," 2005 Meeting Papers 799, Society for Economic Dynamics.
  3. Ronald Wolthoff, 2009. "Ex Ante and Ex Post Inefficiency in Search and Matching Models," 2009 Meeting Papers 774, Society for Economic Dynamics.
  4. John Kennes & Daniel le Maire, 2010. "Coordination Frictions and Job Heterogeneity: A Discrete Time Analysis," Economics Working Papers 2010-05, School of Economics and Management, University of Aarhus.
  5. John Kennes, 2008. "Technology Dispersion and Labor Market Fluctuations," 2008 Meeting Papers 1061, Society for Economic Dynamics.
  6. Derek G. Stacey, 2012. "Information, Commitment, and Separation in Illiquid Housing Markets," Working Papers 1289, Queen's University, Department of Economics.
  7. John Kennes & Daniel le Maire, 2013. "Job Heterogeneity and Coordination Frictions," Economics Working Papers 2013-09, School of Economics and Management, University of Aarhus.
  8. Wolthoff, Ronald P., 2011. "It's About Time: Implications of the Period Length in an Equilibrium Job Search Model," IZA Discussion Papers 6002, Institute for the Study of Labor (IZA).
  9. Benoit Julien & John Kennes & Ian King & Sephorah Mangin, 2008. "Directed Search, Unemployment and Public Policy," Department of Economics - Working Papers Series 1049, The University of Melbourne.
  10. John Kennes & Daniel le Maire, 2013. "Competing Auctions of Skills," CAM Working Papers 2014_01, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.

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