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Structural and Frictional Unemployment in an Equilibrium Search Model with Heterogeneous Agents

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  • Koning, Pierre
  • Ridder, Geert
  • van den Berg, Gerard J

Abstract

We specify and estimate an equilibrium search model with between-market heterogeneity in the productivity levels. The model allows for two types of unemployment: unemployment due to search frictions and unemployment due to wage floors. Wage floors may exist, because of large unemployment benefits or a binding (mandatory) minimum wage. Using data on labor market histories for a sample of Dutch workers, we decompose the total unemployment rate in a structural and frictional unemployment rate. We also discuss the effect of changes in the minimum wage. Copyright 1995 by John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 10 (1995)
Issue (Month): S (Suppl. Dec.)
Pages: S133-51

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Handle: RePEc:jae:japmet:v:10:y:1995:i:s:p:s133-51

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  1. Flinn, C. & Heckman, J., 1982. "New methods for analyzing structural models of labor force dynamics," Journal of Econometrics, Elsevier, vol. 18(1), pages 115-168, January.
  2. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September.
  3. Robert H. Meyer & David A. Wise, 1982. "The Effects of the Minimum Wage on the Employment and Earnings of Youth," NBER Working Papers 0849, National Bureau of Economic Research, Inc.
  4. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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