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Matching, Sorting and Wages

Author

Listed:
  • Jeremy Lise

    (University College London)

  • Costas Meghir

    (Yale University)

  • Jean-Marc Robin

    (Sciences Po)

Abstract

We develop an empirical search-matching model which is suitable for analyzing the wage, employment and welfare impact of regulation in a labor market with heterogeneous workers and jobs. To achieve this we develop an equilibrium model of wage determination and employment which extends the current literature on equilibrium wage determination with matching and provides a bridge between some of the most prominent macro models and microeconometric research. The model incorporates productivity shocks, long-term contracts, on-the-job search and counter-offers. Importantly, the model allows for the possibility of assortative matching between workers and jobs due to complementarities between worker and job characteristics. We use the model to estimate the potential gain from optimal regulation and we consider the potential gains and redistributive impacts from optimal unemployment insurance policy. Here optimal policy is defined as that which maximizes total output and home production, accounting for the various constraints that arise from search frictions. The model is estimated on the NLSY using the method of moments. (Copyright: Elsevier)

Suggested Citation

  • Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2016. "Matching, Sorting and Wages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 63-87, January.
  • Handle: RePEc:red:issued:15-8
    DOI: 10.1016/j.red.2015.11.004
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rasmus Lentz, 2009. "The Research Agenda: Rasmus Lentz on Heterogeneity in the Labor Market," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 11(1), November.
    2. Michele Pellizzari & Anne Fichen, 2013. "A New Measure of Skills Mismatch: Theory and Evidence from the Survey of Adult Skills (PIAAC)," OECD Social, Employment and Migration Working Papers 153, OECD Publishing.
    3. Pietro Garibaldi & Espen Moen & Dag-Einar Sommervoll, 2016. "Competitive On-the-job Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 88-107, January.
    4. Hamish Low & Costas Meghir & Luigi Pistaferri, 2010. "Wage Risk and Employment Risk over the Life Cycle," American Economic Review, American Economic Association, vol. 100(4), pages 1432-1467, September.
    5. Jesper Bagger & Rasmus Lentz, 2014. "An Empirical Model of Wage Dispersion with Sorting," Economics Working Papers 2014-11, Department of Economics and Business Economics, Aarhus University.
    6. Christian Moser & Niklas Engbom, 2016. "Earnings Inequality and the Minimum Wage: Evidence from Brazil," 2016 Meeting Papers 72, Society for Economic Dynamics.
    7. Taber, Christopher & Vejlin, Rune Majlund, 2016. "Estimation of a Roy/Search/Compensating Differential Model of the Labor Market," IZA Discussion Papers 9975, Institute for the Study of Labor (IZA).
    8. Espen R Moen & Rasmus Lentz, 2017. "Competitive or Random Search?," 2017 Meeting Papers 1128, Society for Economic Dynamics.
    9. Rasmus Lentz & Jesper Bagger, 2009. "An Empirical Model of Wage Dispersion with Sorting," 2009 Meeting Papers 964, Society for Economic Dynamics.
    10. Christopher Taber & Rune Vejlin, 2012. "Estimation of a Roy/Search/Compensating Differential Model of the Labor Market," 2012 Meeting Papers 566, Society for Economic Dynamics.
    11. Espen R. Moen & Anna Godøy, 2011. "Taking competitive search to data," 2011 Meeting Papers 880, Society for Economic Dynamics.
    12. Nancy L. Stokey, 2016. "Technology, Skill and the Wage Structure," NBER Working Papers 22176, National Bureau of Economic Research, Inc.
    13. Rasmus Lentz, 2012. "An Empirical Model of Wage Dispersion with Sorting," 2012 Meeting Papers 1040, Society for Economic Dynamics.
    14. Nancy L Stokey, 2016. "Technology, Skill and the Wage Structure," 2016 Meeting Papers 750, Society for Economic Dynamics.
    15. Jan Eeckhout & Philipp Kircher, 2011. "The Research Agenda: Jan Eeckhout and Philipp Kircher on Sorting in Macroeconomic Models," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 13(1), November.
    16. repec:eee:labeco:v:50:y:2018:i:c:p:45-66 is not listed on IDEAS
    17. Michele Pellizzari & Anne Fichen, 2017. "A new measure of skill mismatch: theory and evidence from PIAAC," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-30, December.
    18. Julio Blanco & Gaston Navarro, 2016. "The Unemployment Accelerator," CESifo Working Paper Series 6248, CESifo Group Munich.
    19. Yolanda F. Rebollo-Sanz, 2017. "Decomposing the structure of wages into firm and worker effects: some insights from a high unemployment economy," Working Papers 17.10, Universidad Pablo de Olavide, Department of Economics.

    More about this item

    Keywords

    Sorting; Mismatch; search-matching; Wage dynamics;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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