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Sorting and the Output Loss due to Search Frictions

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  • Pieter A. Gautier

    (VU University Amsterdam)

  • Coen N. Teulings

    (Netherlands Bureau of Policy Analysis CPB, The Hague, and University of Amsterdam)

Abstract

We analyze a general search model with on-the-job search and sorting of heterogeneous workers into heterogeneous jobs. This model yields a simple relationshipbetween (i) the unemployment rate, (ii) the value of non-market time, and (iii) themax-mean wage differential. The latter measure of wage dispersion is more robustthan measures based on the reservation wage, due to the long left tail of the wagedistribution. We estimate this wage differential using data on match quality andallow for measurement error. The estimated wage dispersion and mismatch for theUS is consistent with an unemployment rate of 5%. Finally, we find that withoutsearch frictions, output would be 6.6% higher.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-010/3.

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Date of creation: 14 Jan 2011
Date of revision: 26 Jan 2012
Handle: RePEc:dgr:uvatin:20110010

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

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Keywords: Sorting; search frictions; wage dispersion; unemployment; mismatch; on-the-job search; output loss; business stealing;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Sorting and the Output Loss due to Search Frictions
    by Christian Zimmermann in NEP-DGE blog on 2011-03-01 03:27:44
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Cited by:
  1. William Hawkins, 2013. "Worker Flows under Mismatch," 2013 Meeting Papers 479, Society for Economic Dynamics.
  2. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2013. "Mismatch, Sorting and Wage Dynamics," NBER Working Papers 18719, National Bureau of Economic Research, Inc.
  3. Cai, Xiaoming & Gautier, Pieter A. & Teulings, Coen N. & Watanabe, Makoto, 2014. "Collective versus decentralized wage bargaining and the efficient allocation of resources," Labour Economics, Elsevier, vol. 26(C), pages 34-42.

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