Exploring the Causes of Frictional Wage Dispersion
AbstractStandard search models are unreliable for structural inference of the underlying sources of wage inequality because they are inconsistent with observed residual wage dispersion. We address this issue by modeling skill development and duration dependence in unemployment benefits in a random on the job search model featuring two-sided heterogeneity. General human capital and search on the job are the main drivers behind our model's empirical success in replicating wage dispersion (residual and overall). A realistic quantitative appraisal of search efficiencies needs to account for one third of job to job transitions resulting in wage losses. Controlling for them has important implications for the inferred sources of wage inequality. We find that the search friction accounts for around 18 percent of observed wage inequality.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6299.
Length: 49 pages
Date of creation: Jan 2012
Date of revision:
Publication status: published in: American Economic Journal: Macroeconomics, 2014, 6 (1), 134-161
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Find related papers by JEL classification:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-LAB-2012-02-20 (Labour Economics)
- NEP-LMA-2012-02-20 (Labor Markets - Supply, Demand, & Wages)
- NEP-LTV-2012-02-20 (Unemployment, Inequality & Poverty)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christian Dustmann & Costas Meghir, 1999.
"Wages, experience and seniority,"
IFS Working Papers
W99/01, Institute for Fiscal Studies.
- Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
- Bruce Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series 2004-34, Board of Governors of the Federal Reserve System (U.S.).
- Melvyn Coles & Carlos Carrillo-Tudela & Ken Burdett, 2008.
"Human Capital Accumulation and Labor Market Equilibrium,"
2008 Meeting Papers
1088, Society for Economic Dynamics.
- 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.
- Burdett, Ken & Carrillo-Tudela, Carlos & Coles, Melvyn, 2009. "Human Capital Accumulation and Labour Market Equilibrium," IZA Discussion Papers 4215, Institute for the Study of Labor (IZA).
- Carlos Carrillo-Tudela, 2012.
"Job Search, Human Capital and Wage Inequality,"
CESifo Working Paper Series
3979, CESifo Group Munich.
- Carlos Carrillo-Tudela, 2010. "Job Search, Human Capital and Wage Inequality," 2010 Meeting Papers 723, Society for Economic Dynamics.
- Carrillo-Tudela, Carlos, 2012. "Job search, human capital and wage inequality," ISER Working Paper Series 2012-23, Institute for Social and Economic Research.
- Carrillo-Tudela, Carlos, 2012. "Job Search, Human Capital and Wage Inequality," IZA Discussion Papers 6949, Institute for the Study of Labor (IZA).
- James Mabli & Christopher Flinn, 2007.
"On-the-Job Search, Minimum Wages, and Labor Market Outcomes in an Equilibrium Bargaining Framework,"
2007 Meeting Papers
791, Society for Economic Dynamics.
- Christopher Flinn & James Mabli, 2008. "On-the-Job Search, Minimum Wages, and Labor Market Outcomes in an Equilibrium Bargaining Framework," Carlo Alberto Notebooks 91, Collegio Carlo Alberto.
- 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.
- Tamas Papp, 2013.
"Online Appendix to "Frictional wage dispersion with Bertrand competition: an assessment","
09-187, Review of Economic Dynamics.
- Tamas Papp, 2013. "Frictional wage dispersion with Bertrand competition: an assessment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 540-552, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.