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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
Fax: 44-1206-873151
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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. Shintaro Yamaguchi, 2007. "Job Search, Bargaining, and Wage Dynamics," Department of Economics Working Papers 2007-03, McMaster University.
  2. Robert E. Hall, 1984. "The Importance of Lifetime Jobs in the U.S. Economy," NBER Working Papers 0560, National Bureau of Economic Research, Inc.
  3. Eeckhout, Jan & Kircher, Philipp, 2009. "Identifying Sorting: In Theory," IZA Discussion Papers 4004, Institute for the Study of Labor (IZA).
  4. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 731-749, 08.
  5. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 305-58, May.
  6. Giuseppe Moscarini & Francis G. Vella, 2008. "Occupational Mobility and the Business Cycle," NBER Working Papers 13819, National Bureau of Economic Research, Inc.
  7. Ludo Visschers & Irina Telyukova & Guido Menzio, 2011. "Directed search over the life cycle," 2011 Meeting Papers 1360, Society for Economic Dynamics.
  8. Fabien Postel-Vinay & Hélène Turon, 2010. "On-The-Job Search, Productivity Shocks, And The Individual Earnings Process," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(3), pages 599-629, 08.
  9. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, Econometric Society, vol. 70(6), pages 2295-2350, November.
  10. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 439-79, May.
  11. 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.
  12. Giovanni L. Violante & Per Krusell & Andreas Hornstein, 2006. "Frictional wage dispersion in search models: a quantitative assessment," Working Paper, Federal Reserve Bank of Richmond 06-07, Federal Reserve Bank of Richmond.
  13. Bunzel, H. & Christensen, B.J. & Kiefer, N.M. & Korsholm, L., 1999. "Equilibrium Search with Human Capital Accumulation," Papers, Centre for Labour Market and Social Research, Danmark- 99-11, Centre for Labour Market and Social Research, Danmark-.
  14. Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Working Papers tecipa-437, University of Toronto, Department of Economics.
  15. 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, Elsevier, vol. 50(4), pages 877-907, May.
  16. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  17. Lentz, Rasmus, 2010. "Sorting by search intensity," Journal of Economic Theory, Elsevier, Elsevier, vol. 145(4), pages 1436-1452, July.
  18. 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.
  19. repec:ese:iserwp:2012-07 is not listed on IDEAS
  20. 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.
  21. Melvyn Coles & Carlos Carrillo-Tudela & Ken Burdett, 2008. "Human Capital Accumulation and Labor Market Equilibrium," 2008 Meeting Papers 1088, Society for Economic Dynamics.
  22. Melvyn G. Coles & Dale T. Mortensen, 2012. "Equilibrium Labor Turnover, Firm Growth and Unemployment," NBER Working Papers 18022, National Bureau of Economic Research, Inc.
  23. Gadi Barlevy, 2008. "Identification of Search Models using Record Statistics," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 29-64.
  24. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  25. Audra J. Bowlus & Huju Liu, 2012. "The Contributions of Search and Human Capital to Earnings Growth Over the Life Cycle," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers, University of Western Ontario, CIBC Centre for Human Capital and Productivity 20122, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  26. Carlos Carrillo-Tudela, 2009. "An Equilibrium Search Model with Optimal Wage-Experience Contracts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 108-128, January.
  27. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 407, Massachusetts Institute of Technology (MIT), Department of Economics.
  28. Christian Dustmann & Costas Meghir, 2001. "Wages, experience and seniority," IFS Working Papers, Institute for Fiscal Studies W01/01, Institute for Fiscal Studies.
  29. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  30. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
  31. repec:ese:iserwp:2006-39 is not listed on IDEAS
  32. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1039-74, November.
  33. Iourii Manovskii & Marcus Hagedorn, 2011. "Search Frictions and Wage Dispersion," 2011 Meeting Papers 1195, Society for Economic Dynamics.
  34. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
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Citations

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Cited by:
  1. Bowlus, Audra J. & Liu, Huju, 2013. "The contributions of search and human capital to earnings growth over the life cycle," European Economic Review, Elsevier, Elsevier, vol. 64(C), pages 305-331.
  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. Volker Tjaden & Felix Wellschmied, 2011. "Exploring the Causes of Frictional Wage Dispersion," Bonn Econ Discussion Papers, University of Bonn, Germany bgse04_2011, University of Bonn, Germany.
  4. 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.

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