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Structural Aspects of the Labor Markets of Five OECD Countries

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  • Geert Ridder

    ()
    (Vrije Universiteit Amsterdam)

  • Niels de Visser

    (Vrije Universiteit Amsterdam)

  • Gerard van den Berg

    ()
    (Vrije Universiteit Amsterdam)

Abstract

The simplest equilibrium search models depend on a few parameters that determine the joint distribution of unemployment spells, job spells, and wages. In this study we use aggregate data to estimate these key parameters for five OECD countries: (West-)Germany, The Netherlands, France, the United Kingdom and the USA. We show that in the simple model only information on the marginal distribution of wages and the marginal distributions of unemployment and job spells is needed to estimate the structural parameters. Thus, the methodological contribution of this paper is the demonstration that the model can be calibrated from readily available aggregate data, and that panel data on individuals are not necessary. Our estimation method provides a direct link between types of information and parameters. We show that data on job durations allow us to estimate an index of the search frictions, without the need to estimate the other parameters simultaneously. The parameters, the arrival rate of wage offers, the rate of job destruction, the average productivity of jobs, and the variation of job productivities are of interest in their own right. We also use the parameter estimates to obtain estimates of structuralunemployment due to wage floors, of the average level of monopsony power in the economy, and to make a decomposition of wage variation into variation due to productive differences between jobs and variation due to search frictions.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 97-001/4.

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Date of creation: 07 Jan 1997
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Handle: RePEc:dgr:uvatin:19970001

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Web page: http://www.tinbergen.nl

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  1. Mortensen, Dale T., 1987. "Job search and labor market analysis," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 15, pages 849-919 Elsevier.
  2. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  3. Albrecht, James W & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Paper Series 99, Research Institute of Industrial Economics.
  4. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
  5. van den Berg, Gerard J, 1990. "Search Behaviour, Transitions to Nonparticipation and the Duration of Unemployment," Economic Journal, Royal Economic Society, vol. 100(402), pages 842-65, September.
  6. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Koning, Pierre & Ridder, Geert & van den Berg, Gerard J, 1995. "Structural and Frictional Unemployment in an Equilibrium Search Model with Heterogeneous Agents," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages S133-51, Suppl. De.
  8. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  9. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
  10. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  11. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  12. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  13. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
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