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Mismatch, Sorting and Wage Dynamics

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Abstract

We develop an empirical search-matching model which is suitable for analyzing the wage, employment and welfare impact of regulation in a labor market with heterogeneous workers and jobs. To achieve this we develop an equilibrium model of wage determination and employment which extends the current literature on equilibrium wage determination with matching and provides a bridge between some of the most prominent macro models and microeconometric research. The model incorporates productivity shocks, long-term contracts, on-the-job search and counter-offers. Importantly, the model allows for the possibility of assortative matching between workers and jobs due to complementarities between worker and job characteristics. We use the model to estimate the potential gain from optimal regulation and we consider the potential gains and redistributive impacts from optimal unemployment insurance policy. The model is estimated on the NLSY using the method of moments.

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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1886.

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Length: 44 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:cwl:cwldpp:1886

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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Keywords: Matching; Equilibrium wage distributions; Job mobility; Simulated method of moments; MCMC;

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References

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Mismatch, Sorting and Wage Dynamics
    by Christian Zimmermann in NEP-DGE blog on 2013-02-06 19:56:18
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Cited by:
  1. Xiaoming Cai & Pieter A. Gautier & Makoto Watanabe, 2012. "Collective versus Decentralized Wage Bargaining and the Efficient Allocation of Resources," Tinbergen Institute Discussion Papers 12-086/3, Tinbergen Institute.

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