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Endogenous On-the-job Search and Frictional Wage Dispersion

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  • Matthias S. Hertweck

    ()
    (University of Basel)

Abstract

This paper addresses the large degree of frictional wage dispersion in US data. The standard job matching model without on-the-job search cannot replicate this pattern. With on-the-job search, however, unemployed job searchers are more will- ing to accept low wage offers since they can continue to seek for better employment opportunities. This explains why observably identical workers may be paid very differently. Therefore, we examine the quantitative implications of on-the-job search in a stochastic job matching model. Our key result is that the inclusion of variable on-the-job search increases the degree of frictional wage dispersion by an order of a magnitude.

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Bibliographic Info

Paper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2010/02.

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Date of creation: 2010
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Handle: RePEc:bsl:wpaper:2010/02

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Related research

Keywords: Matching; On-the-job Search; Wage Dispersion;

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Cited by:
  1. Steven J. Davis & Till Von Wachter, 2011. "Recessions and the Costs of Job Loss," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 1-72.

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