Wage Distributions and Wage Dynamics in Europe and the US: Lessons from a Simple Job Search Model
AbstractJob search models of the labor market hypothesize a very tight correspondence between the determinants of labor turnover and individual wage dynamics on one hand, and the determinants of wage dispersion on the other. This paper offers a systematic examination of whether this correspondence is present in the data by estimating a rudimentary partial equilibrium job search model on a 3-year panel of individual worker data covering 10 European countries and the U.S. We find that our basic job search model fits the data surprisingly well. This also allows us to point at a number of interesting empirical regularities about wage distributions. Our results suggest that cross-sectional data on individual wages contain the basic information needed to obtain reliable estimates of the "search frictions" parameters of a canonical job search model. Finally, we use our results in a cross-country comparison of the intensity and nature of job-to-job turnover. We arrange countries into two different groups according to their turnover intensity. We further show that the nature of job-to-job turnover is very different between those two groups: turnover is predominantly voluntary in the group of low-turnover countries (which roughly coincides with continental Europe), whereas it is to a large extent involuntary in high-turnover countries (Denmark, the U.K. and the U.S.)
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 23.
Date of creation: 2004
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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Labor market frictions; wage distributions; wage dynamics; job mobility;
Other versions of this item:
- Grégory Jolivet & Fabien Postel-Vinay & Jean-Marc Robin, 2003. "Wage distributions and wage dynamics in Europe and the US : lessons from a simple job search model," Research Unit Working Papers 0302, Laboratoire d'Economie Appliquee, INRA.
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
- NEP-DGE-2004-08-02 (Dynamic General Equilibrium)
- NEP-LAB-2004-08-02 (Labour Economics)
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- Etienne Wasmer, 2006. "Interpreting Europe and US labor markets differences : the specificity of human capital investments," Sciences Po publications info:hdl:2441/8904, Sciences Po.
- Drago, Francesco, 2006. "Career Consequences of Hyperbolic Time Preferences," IZA Discussion Papers 2113, Institute for the Study of Labor (IZA).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
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