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Job Search, Bargaining, and Wage Dynamics

  • Shintaro Yamaguchi

This article constructs and estimates a model of wage bargaining with on-the-job search to explore three different components of wages: general human capital, match-specific capital, and outside options. As the workers find better job opportunities, the current employer has to compete with outside firms to retain them. This between-firm competition results in wage growth even when productivity remains the same. The model is estimated by a simulated minimum distance estimator and data from the 1979 National Longitudinal Study of Youth. The results indicate that the improved value of the outside option raises wages by 14%-16% in the first 5 years. (c) 2010 by The University of Chicago.

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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 28 (2010)
Issue (Month): 3 (07)
Pages: 595-631

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Handle: RePEc:ucp:jlabec:v:28:y:2010:i:3:p:595-631
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