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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. Berg, G.J. van den, 1988. "Search behaviour, transitions to nonparticipation and the duration of unemployment," Research Memorandum, Tilburg University, Faculty of Economics and Business Administration 338, Tilburg University, Faculty of Economics and Business Administration.
  2. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Albrecht, James & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Papers, C.V. Starr Center for Applied Economics, New York University 83-10, C.V. Starr Center for Applied Economics, New York University.
  4. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, Econometric Society, vol. 56(2), pages 259-93, March.
  5. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  6. Mortensen, Dale T., 1987. "Job search and labor market analysis," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 15, pages 849-919 Elsevier.
  7. Berg, G.J. & Ridder, G., 1993. "An empirical equilibrium search model of the labour market," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  8. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc.
  9. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, Elsevier, vol. 3(2), pages 156-168, June.
  10. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  11. Joseph G. Altonji & Robert A. Shakotko, 1985. "Do Wages Rise With Job Seniority?," NBER Working Papers 1616, National Bureau of Economic Research, Inc.
  12. 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.
  13. Koning, Pierre & Ridder, Geert & Berg, Gerard J. van den, 1994. "Structural and frictional unemployment in an equilibrium search model with heterogeneous agents," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0052, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
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