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Labor Market Search And Schooling Investment

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  • Christopher Flinn
  • Joseph Mullins

Abstract

We generalize a search, matching, and bargaining model to allow individuals to acquire productivity‐enhancing schooling prior to labor market entry. In general, search frictions and weakness in bargaining position contribute to underinvestment in schooling from an efficiency perspective. Using estimates of a general equilibrium version of the model in which firm vacancy creation decisions are included, we find that minimum wages and schooling subsidies improve aggregate welfare, but have very different welfare impacts across the ability distribution. In particular, policies that maximize the average welfare of workers have strongly negative effects on the welfare of the least able.

Suggested Citation

  • Christopher Flinn & Joseph Mullins, 2015. "Labor Market Search And Schooling Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(2), pages 359-398, May.
    • Handle: RePEc:wly:iecrev:v:56:y:2015:i:2:p:359-398
    DOI: 10.1111/iere.12108
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    2. Matteo Bobba & Luca Flabbi & Santiago Levy, 2022. "Labor Market Search, Informality, And Schooling Investments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 211-259, February.
    3. Jung, Yeonha, 2023. "Formation of the legacy of slavery: Evidence from the US South," European Economic Review, Elsevier, vol. 154(C).
    4. Daniela Del Boca & Christopher Flinn & Ewout Verriest & Matthew Wiswall, 2018. "Actors in the Child Development Process," Carlo Alberto Notebooks 575, Collegio Carlo Alberto.
    5. Girsberger, Esther Mirjam & Meango, Romuald, 2022. "The Puzzle of Educated Unemployment in West Africa," IZA Discussion Papers 15721, Institute of Labor Economics (IZA).
    6. Alessandra Bonfiglioli & Gino Gancia, 2019. "Heterogeneity, selection and labor market disparities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 305-325, January.
    7. Liu, Qianshuo & Macho-Stadler, Inés, 2023. "Education choices and job market characteristics," Economics Letters, Elsevier, vol. 223(C).
    8. Maqbool H. Sial & Ghulam Sarwar & Mubashra Saeed, 2019. "Surplus Education and Earnings Differentials in Pakistan: A Quantile Regression Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 24(2), pages 93-114, July-Dec.
    9. Esther Mirjam Girsberger & Miriam Rinawi & Matthias Krapf, 2018. "Wages and employment: The role of occupational skills," Economics of Education Working Paper Series 0153, University of Zurich, Department of Business Administration (IBW).
    10. Yujing Xu, 2022. "Unobservable investments, trade efficiency and search frictions," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 764-799, May.
    11. Christine Braun, 2019. "Crime and the minimum wage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 122-152, April.
    12. Girsberger, Esther Mirjam & Koomen, Miriam & Krapf, Matthias, 2022. "Interpersonal, cognitive, and manual skills: How do they shape employment and wages?," Labour Economics, Elsevier, vol. 78(C).
    13. Roberto Bonilla & Francis Kiraly, 2019. "Male Investment in Schooling with Frictional Labour and Marriage Markets," CESifo Working Paper Series 7901, CESifo.
    14. Fiaschi, Davide & Tealdi, Cristina, 2020. "Winners and Losers of Immigration," IZA Discussion Papers 13600, Institute of Labor Economics (IZA).
    15. Daniela Del Boca & Christopher Flinn & Ewout Verriest & Matthew Wiswall, 2018. "Actors in the Child Development Process," Carlo Alberto Notebooks 575, Collegio Carlo Alberto.
    16. Gicheva, Dora, 2012. "Worker mobility, employer-provided general training, and the choice of graduate education," Labour Economics, Elsevier, vol. 19(2), pages 232-240.
    17. Jackson, Paul, 2023. "Equilibrium underemployment," Labour Economics, Elsevier, vol. 81(C).
    18. Darong Dai & Guoqiang Tian, 2020. "On the Efficiency of Wage-Setting Mechanisms with Search Frictions and Human Capital Investment," Annals of Economics and Finance, Society for AEF, vol. 21(1), pages 1-40, May.
    19. Cervantes, Carla Varona & Cooper, Russell, 2022. "Labor market implications of education mismatch," European Economic Review, Elsevier, vol. 148(C).
    20. Rutledge, Zachariah & Richards, Timothy J., 2023. "Health Coverage and Farmworker Productivity," 2023 Annual Meeting, July 23-25, Washington D.C. 335436, Agricultural and Applied Economics Association.

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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