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Exploring the Causes of Frictional Wage Dispersion

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Author Info

  • Volker Tjaden
  • Felix Wellschmied
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    Abstract

    Standard search models are inconsistent with the amount of frictional wage dis- persion found in U.S. data. We resolve this apparent puzzle by modeling skill development (learning by doing on the job, skill loss during unemployment) and duration dependence in unemployment benets in a random on the job search model featuring two-sided heterogeneity. The model's key parameters are calibrated using micro data on employment mobility and wages from the Survey of Income and Program Participation (SIPP). Our model is consistent with the amount of frictional wage dispersion found in the data. Skill develop- ment on the job is the most important driver behind this result. Meanwhile, firm heterogeneity never accounts for more than 20% of overall wage inequality within an age cohort.

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    File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse04_2011.pdf
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    Bibliographic Info

    Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse04_2011.

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    Length: 44
    Date of creation: May 2011
    Date of revision:
    Handle: RePEc:bon:bonedp:bgse04_2011

    Contact details of provider:
    Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
    Fax: +49 228 73 6884
    Web page: http://www.bgse.uni-bonn.de/index.php?id=494

    Related research

    Keywords: Frictional wage dispersion; Search model; Heterogeneity;

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    1. Carlos Carrillo-Tudela, 2010. "Job Search, Human Capital and Wage Inequality," 2010 Meeting Papers 723, Society for Economic Dynamics.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Exploring the Causes of Frictional Wage Dispersion
      by Christian Zimmermann in NEP-DGE blog on 2011-06-06 13:26:56

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