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Hedonic Wages and Labor Market Search

Author

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  • Hwang, Hae-shin
  • Mortensen, Dale T
  • Reed, W Robert

Abstract

This article investigates the consequences of labor-market search for the theory of hedonic wages. The authors find that the introduction of search has surprising consequences for the theory of hedonic wages. In particular, they demonstrate that the equilibrium distribution of wage and nonwage amenity bundles generally bears little resemblance to workers' underlying preferences. A consequence of this analysis is that estimates of workers' marginal willingness to pay, derived from the conventional hedonic wage methodology, are biased. In addition, the authors demonstrate that search generates differences between firm-level and employee-level data that can cause substantial deviations in the estimates of hedonic wage equations. Copyright 1998 by University of Chicago Press.

Suggested Citation

  • Hwang, Hae-shin & Mortensen, Dale T & Reed, W Robert, 1998. "Hedonic Wages and Labor Market Search," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 815-847, October.
  • Handle: RePEc:ucp:jlabec:v:16:y:1998:i:4:p:815-47
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    References listed on IDEAS

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    1. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    2. Dale T. Mortensen, 1988. "Equilibrium Wage Distrihutions: A Synthesis," Discussion Papers 811, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 835-858, August.
    4. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 637-655, June.
    5. Khandker, Rezaul K, 1988. "Offer Heterogeneity in a Two State Model of Sequential Search," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 259-265, May.
    6. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 535-560, June.
    7. Harry J. Holzer, 1987. "Job Search by Employed and Unemployed Youth," ILR Review, Cornell University, ILR School, vol. 40(4), pages 601-611, July.
    8. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    9. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 94(1), pages 113-134.
    10. Wessels, Walter J, 1980. "The Effect of Minimum Wages in the Presence of Fringe Benefits: An Expanded Model," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 293-313, April.
    11. Timothy J. Gronberg & W. Robert Reed, 1994. "Estimating Workers' Marginal Willingness to Pay for Job Attributes Using Duration Data," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 911-931.
    12. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-1087, December.
    13. Mattila, J Peter, 1974. "Job Quitting and Frictional Unemployment," American Economic Review, American Economic Association, vol. 64(1), pages 235-239, March.
    14. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 111-143, June.
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