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Job search, human capital and wage inequality

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  • Carrillo-Tudela, Carlos

Abstract

This paper constructs and quantitatively assesses an equilibrium search model with on-the- job search and general human capital accumulation. In the model workers differ in their innate abilities and firms in their productivities. Wages are dispersed because of search frictions and workers productivity differentials. Using the (log) wage variance decomposition implied by the model I show that wage inequality among low skilled workers is mostly driven by differences in their productivities. Among medium skilled workers, productivity differentials and search frictions are equally important. The model reproduces the observed cross-sectional wage distribution, the average wage-experience profile and the observed Mean-min ratio.

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Bibliographic Info

Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2012-23.

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Date of creation: 22 Oct 2012
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Publication status: published
Handle: RePEc:ese:iserwp:2012-23

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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
Phone: 44-1206-872957
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Web page: https://www.iser.essex.ac.uk/
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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
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Web: https://www.iser.essex.ac.uk/publications/

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References

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  1. Hall, Robert E, 1982. "The Importance of Lifetime Jobs in the U.S. Economy," American Economic Review, American Economic Association, vol. 72(4), pages 716-24, September.
  2. Fabien Postel-Vinay & Hélène Turon, 2005. "On-the-job Search, Productivity Shocks, and the Individual Earnings Process," PSE Working Papers halshs-00590726, HAL.
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  6. Bontemps, Christian & Robin, Jean-Marc & Van den Berg, Gerard J, 1999. "An Empirical Equilibrium Job Search Model with Search on the Job and Heterogeneous Workers and Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1039-74, November.
  7. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
  8. Ludo Visschers & Irina Telyukova & Guido Menzio, 2011. "Directed search over the life cycle," 2011 Meeting Papers 1360, Society for Economic Dynamics.
  9. Carlos Carrillo-Tudela, 2008. "Code for "An Equilibrium Search Model with Optimal Wage-Experience Contracts"," Computer Codes 06-134, Review of Economic Dynamics.
  10. Bunzel, H. & Christensen, B.J. & Kiefer, N.M. & Korsholm, L., 1999. "Equilibrium Search with Human Capital Accumulation," Papers 99-11, Centre for Labour Market and Social Research, Danmark-.
  11. Christian Dustmann & Costas Meghir, 1999. "Wages, experience and seniority," IFS Working Papers W99/01, Institute for Fiscal Studies.
  12. Iourii Manovskii & Marcus Hagedorn, 2011. "Search Frictions and Wage Dispersion," 2011 Meeting Papers 1195, Society for Economic Dynamics.
  13. Kenneth Burdett & Carlos Carrillo‐Tudela & Melvyn G. Coles, 2011. "Human Capital Accumulation And Labor Market Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 657-677, 08.
  14. Giovanni L. Violante & Per Krusell & Andreas Hornstein, 2006. "Frictional wage dispersion in search models: a quantitative assessment," Working Paper 06-07, Federal Reserve Bank of Richmond.
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  17. Bowlus, Audra J. & Liu, Huju, 2013. "The contributions of search and human capital to earnings growth over the life cycle," European Economic Review, Elsevier, vol. 64(C), pages 305-331.
  18. Rasmus Lentz & Dale T. Mortensen, 2005. "Productivity Growth And Worker Reallocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 731-749, 08.
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  23. Jean-Marc Robin & Francois Fontaine & Fabien Postel-Vinay & Jesper Bagger, 2011. "A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation," 2011 Meeting Papers 278, Society for Economic Dynamics.
  24. Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 468 - 510.
  25. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
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  27. Bontemps, Christian & Robin, Jean-Marc & van den Berg, Gerard J, 2000. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 305-58, May.
  28. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  29. Christian Bontemps & Jean-Marc Robin & Gérard J. Van Den Berg, 2000. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation," Working Papers 249986, Institut National de la Recherche Agronomique, France.
  30. Lentz, Rasmus, 2010. "Sorting by search intensity," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1436-1452, July.
  31. Guido Menzio & Shouyong Shi, 2008. "Efficient Search on the Job and the Business Cycle, Second Version," PIER Working Paper Archive 09-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Feb 2009.
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Cited by:
  1. Xiao, Chaoqun & Tang, Wansheng & Zhao, Ruiqing & Zhou, Chi, 2013. "Equilibrium search with heterogeneous firms, workers and endogenous human capital," MPRA Paper 52136, University Library of Munich, Germany.
  2. Tjaden, Volker & Wellschmied, Felix, 2012. "Exploring the Causes of Frictional Wage Dispersion," IZA Discussion Papers 6299, Institute for the Study of Labor (IZA).
  3. Bowlus, Audra J. & Liu, Huju, 2013. "The contributions of search and human capital to earnings growth over the life cycle," European Economic Review, Elsevier, vol. 64(C), pages 305-331.
  4. Volker Tjaden & Felix Wellschmied, 2011. "Exploring the Causes of Frictional Wage Dispersion," Bonn Econ Discussion Papers bgse04_2011, University of Bonn, Germany.

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