Intertemporal Labour Supply with Search Frictions
AbstractStarting in the 1970's, wage inequality and the number of hours worked by employed U.S. prime-age male workers have both increased. We argue that these two facts are related. We use a labour market model with on-the-job search where by working longer hours individuals acquire greater skills. Since job candidates are ranked by productivity, greater skills not only increase worker's productivity in the current job but also help the worker to obtain better jobs. When job offers become more dispersed, wage inequality increases and workers work longer hours to obtain better jobs. As a result, average hours per worker in the economy increase. This mechanism accounts for around two-thirds of the increase in hours observed in data. Part of the increase is inefficient since workers obtain better jobs at the expense of other workers competing for the same jobs. Copyright , Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal The Review of Economic Studies.
Volume (Year): 79 (2012)
Issue (Month): 3 ()
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- Audra J. Bowlus & Huju Liu, 2012. "The Contributions of Search and Human Capital to Earnings Growth Over the Life Cycle," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20122, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
- Dolado, Juan J. & Ortigueira, Salvador & Stucchi, Rodolfo, 2012.
"Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms,"
CEPR Discussion Papers
8763, C.E.P.R. Discussion Papers.
- Juan Jóse Dolado & Salvador Ortigueira & Rodolfo Stucchi, 2011. "Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms," Economics Working Papers we1137, Universidad Carlos III, Departamento de Economía.
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