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The effect of search frictions on wages

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Author Info

  • van den Berg, Gerard J.

    () (IFAU - Institute for labour market policy evaluation)

  • van Vuuren, Aico

    (Erasmus University Amsterdam)

Abstract

Labour market theories allowing for search frictions make marked predictions on the effect of the degree of frictions on wages. Often, the effect is predicted to be negative. Despite the popularity of these theories, this has never been tested. We perform tests with matched worker-firm data. The worker data are informative on individual wages and labour market transitions, and this allows for estimation of the degree of search frictions. The firm data are informative on labor productivity. The matched data provide the skill composition in different markets. Together this allows us to investigate how the mean difference between labor productivity and wages in a market depends on the degree of frictions and other determinants. We correct for worker self-selection into high-wage jobs. Using within-market variation, we also investigate the extent of (and explanations for) positive assortative matching.

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Bibliographic Info

Paper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2003:12.

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Length: 55 pages
Date of creation: 17 Jun 2003
Date of revision:
Publication status: Published as van den Berg, Gerard J. and Aico van Vuuren, 'The effect of search frictions on wages' in Labour Economics, 2010, pages 875-885.
Handle: RePEc:hhs:ifauwp:2003_012

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Keywords: Labor market imperfections; job durations; productivity; heterogeneity; sorting; assortative matching;

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References

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Citations

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Cited by:
  1. Mendes, Rute & van den Berg, Gerard J. & Lindeboom, Maarten, 2007. "An Empirical Assessment of Assortative Matching in the Labor Market," IZA Discussion Papers 3053, Institute for the Study of Labor (IZA).
  2. Fontaine, François, 2008. "Why are similar workers paid differently? the role of social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3960-3977, December.
  3. Pieter Gautier & Paul Muller & Bas van der Klaauw & Michael Rosholm & Michael Svarer, 2012. "Estimating Equilibrium Effects of Job Search Assistance," Tinbergen Institute Discussion Papers 12-071/3, Tinbergen Institute.
  4. Gautier, Pieter & Muller, Paul & van der Klaauw, Bas & Rosholm, Michael & Svarer, Michael, 2012. "Estimating Equilibrium Effects of Job Search Assistance," IZA Discussion Papers 6748, Institute for the Study of Labor (IZA).
  5. Paul Frijters & Michael A. Shields, 2010. "Are Early Educational Choices Affected by Unemployment Benefits? New Theory," Discussion Papers Series 447, School of Economics, University of Queensland, Australia.
  6. Torres, Sónia & Portugal, Pedro & Addison, John T. & Guimaraes, Paulo, 2013. "The Sources of Wage Variation: A Three-Way High-Dimensional Fixed Effects Regression Model," IZA Discussion Papers 7276, Institute for the Study of Labor (IZA).
  7. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2013. "Mismatch, Sorting and Wage Dynamics," Cowles Foundation Discussion Papers 1886, Cowles Foundation for Research in Economics, Yale University.
  8. Garloff, Alfred, 2003. "Lohndispersion und Arbeitslosigkeit: Neuere Ansätze in der Suchtheorie," ZEW Discussion Papers 03-60, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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