IDEAS home Printed from https://ideas.repec.org/p/cam/camdae/1737.html
   My bibliography  Save this paper

Returns to On-the-Job Search and the Dispersion of Wages

Author

Listed:
  • Gottfries, A.
  • Teulings, T.

Abstract

A wide class of models with On-the-Job Search (OJS) predicts that workers gradually select into better-paying jobs. We develop a simple methodology to test predictions implied by OJS using two sources of identification: (i) time-variation in job-finding rates and (ii) the time since the last lay-off. Conditional on the termination date of the job, job duration should be distributed uniformly. This methodology is applied to the NLSY 79. We find remarkably strong support for all implications. The standard deviation of the wage offer distribution is about 15%. OJS accounts for 30% of the experience profile, 9% of total wage dispersion and an average wage loss of 11% following a lay-off.

Suggested Citation

  • Gottfries, A. & Teulings, T., 2017. "Returns to On-the-Job Search and the Dispersion of Wages," Cambridge Working Papers in Economics 1737, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1737
    Note: ag558, cnt23
    as

    Download full text from publisher

    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1737.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    2. Jeremy Lise & Fabien Postel-Vinay, 2020. "Multidimensional Skills, Sorting, and Human Capital Accumulation," American Economic Review, American Economic Association, vol. 110(8), pages 2328-2376, August.
    3. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    4. Bontemps, Christian & Robin, Jean-Marc & van den Berg, Gerard J, 2000. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 305-358, May.
    5. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-380, October.
    6. Jesper Bagger & Fran?ois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2014. "Tenure, Experience, Human Capital, and Wages: A Tractable Equilibrium Search Model of Wage Dynamics," American Economic Review, American Economic Association, vol. 104(6), pages 1551-1596, June.
    7. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    8. Fatih Guvenen & Burhan Kuruscu & Satoshi Tanaka & David Wiczer, 2020. "Multidimensional Skill Mismatch," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(1), pages 210-244, January.
    9. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, September.
    10. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 457-475.
    11. Jesper Bagger & Fran?ois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2014. "Tenure, Experience, Human Capital, and Wages: A Tractable Equilibrium Search Model of Wage Dynamics," American Economic Review, American Economic Association, vol. 104(6), pages 1551-1596, June.
    12. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8grh35j2 is not listed on IDEAS
    13. Christian Dustmann & Costas Meghir, 2005. "Wages, Experience and Seniority," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 77-108.
    14. Rivera Drew, Julia A. & Flood, Sarah & Warren, John Robert, 2014. "Making full use of the longitudinal design of the Current Population Survey: Methods for linking records across 16 months\m{1}," Journal of Economic and Social Measurement, IOS Press, issue 3, pages 121-144.
    15. Jesper Bagger & Francois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2014. "Tenure, Experience, Human Capital, and Wages," Post-Print hal-01301431, HAL.
    16. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
    17. Steven J. Davis & Till Von Wachter, 2011. "Recessions and the Costs of Job Loss," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 1-72.
    18. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Post-Print hal-03587660, HAL.
    19. Peter Fredriksson & Lena Hensvik & Oskar Nordström Skans, 2018. "Mismatch of Talent: Evidence on Match Quality, Entry Wages, and Job Mobility," American Economic Review, American Economic Association, vol. 108(11), pages 3303-3338, November.
    20. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Post-Print hal-03458567, HAL.
    21. Volker Tjaden & Felix Wellschmied, 2014. "Quantifying the Contribution of Search to Wage Inequality," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(1), pages 134-161, January.
    22. Iourii Manovskii & Marcus Hagedorn, 2011. "Search Frictions and Wage Dispersion," 2011 Meeting Papers 1195, Society for Economic Dynamics.
    23. Steven J. Davis & Till Von Wachter, 2011. "Recessions and the Costs of Job Loss," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 1-72.
    24. repec:hal:spmain:info:hdl:2441/7rep5mp5ij95l94ec64n5tdclp is not listed on IDEAS
    25. Gadi Barlevy, 2008. "Identification of Search Models using Record Statistics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(1), pages 29-64.
    26. Marcus Hagedorn & Iourii Manovskii, 2013. "Job Selection and Wages over the Business Cycle," American Economic Review, American Economic Association, vol. 103(2), pages 771-803, April.
    27. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, March.
    28. Gautier, P.A. & Teulings, C.N., 2009. "Search and the city," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 251-265, May.
    29. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms985085gkbp is not listed on IDEAS
    30. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hartog, Joop & Raposo, Pedro, 2017. "Are starting wages reduced by an insurance premium for preventing wage decline? Testing the prediction of Harris and Holmstrom (1982)," Labour Economics, Elsevier, vol. 48(C), pages 105-119.
    2. Christian Dustmann & Hyejin Ku & Tetyana Surovtseva, 2024. "Real Exchange Rates and the Earnings of Immigrants," The Economic Journal, Royal Economic Society, vol. 134(657), pages 271-294.
    3. Rune Vejlin & Gregory F. Veramendi, 2023. "Sufficient statistics for frictional wage dispersion and growth," Quantitative Economics, Econometric Society, vol. 14(3), pages 935-979, July.
    4. Axel Gottfries, 2018. "Partial commitment in models of on-the-job search with an application to minimum wage spillovers," 2018 Meeting Papers 567, Society for Economic Dynamics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gottfries, Axel & Teulings, Coen, 2017. "Returns to On-the-Job Search and the Dispersion of Wages," IZA Discussion Papers 10668, Institute of Labor Economics (IZA).
    2. Gottfries, Axel & Teulings, Coen, 2016. "Returns to on-the-job search and the dispersion of wages," LSE Research Online Documents on Economics 86219, London School of Economics and Political Science, LSE Library.
    3. Axel Gottfries & Coen N. Teulings, 2017. "Returns to On-The-Job Search and the Dispersion of Wages," CESifo Working Paper Series 6410, CESifo.
    4. Teulings, Coen & Gottfries, Axel, 2017. "Returns to on-the-job search and the dispersion of wages," CEPR Discussion Papers 11921, C.E.P.R. Discussion Papers.
    5. Axel Gottfries & Coen N. Teulings, 2016. "Returns to on-the-job search and the dispersion of wages," Discussion Papers 1629, Centre for Macroeconomics (CFM).
    6. Gottfries, Axel & Teulings, Coen, 2023. "Returns to on-the-job search and wage dispersion," Labour Economics, Elsevier, vol. 80(C).
    7. Philip Jung & Moritz Kuhn, 2019. "Earnings Losses and Labor Mobility Over the Life Cycle," Journal of the European Economic Association, European Economic Association, vol. 17(3), pages 678-724.
    8. Rune Vejlin & Gregory F. Veramendi, 2023. "Sufficient statistics for frictional wage dispersion and growth," Quantitative Economics, Econometric Society, vol. 14(3), pages 935-979, July.
    9. Jesper Bagger & Fran?ois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2014. "Tenure, Experience, Human Capital, and Wages: A Tractable Equilibrium Search Model of Wage Dynamics," American Economic Review, American Economic Association, vol. 104(6), pages 1551-1596, June.
    10. repec:hal:spmain:info:hdl:2441/7rep5mp5ij95l94ec64n5tdclp is not listed on IDEAS
    11. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09j0045h4bh is not listed on IDEAS
    12. 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.
    13. Niklas Engbom & Christian Moser, 2022. "Earnings Inequality and the Minimum Wage: Evidence from Brazil," American Economic Review, American Economic Association, vol. 112(12), pages 3803-3847, December.
    14. repec:hal:spmain:info:hdl:2441/78hlmdbud88hhp5vbdddivv2hu is not listed on IDEAS
    15. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2016. "Matching, Sorting, and Wages," SciencePo Working papers hal-03392023, HAL.
    16. repec:hal:spmain:info:hdl:2441/6ggbvnr6munghes9od0s108ro is not listed on IDEAS
    17. Nobuhiro Kiyotaki & Ricardo Lagos, 2007. "A Model of Job and Worker Flows," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 770-819, October.
    18. Christopher Taber & Rune Vejlin, 2020. "Estimation of a Roy/Search/Compensating Differential Model of the Labor Market," Econometrica, Econometric Society, vol. 88(3), pages 1031-1069, May.
    19. Eran B. Hoffmann & Mr. Davide Malacrino, 2018. "Employment Time and the Cyclicality of Earnings Growth," IMF Working Papers 2018/115, International Monetary Fund.
    20. Fella, Giulio & Audoly, Richard & De Pace, Federica, 2022. "Job Ladder, Human Capital, and the Cost of Job Loss," CEPR Discussion Papers 17746, C.E.P.R. Discussion Papers.
    21. Hoffmann, Eran B. & Malacrino, Davide, 2019. "Employment time and the cyclicality of earnings growth," Journal of Public Economics, Elsevier, vol. 169(C), pages 160-171.
    22. Stijepic Damir, 2020. "Job Mobility and Sorting: Theory and Evidence," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(1), pages 19-49, February.
    23. Stijepic Damir, 2020. "Job Mobility and Sorting: Theory and Evidence," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(1), pages 19-49, February.
    24. Marcelo Arbex & Dennis O'Dea & David Wiczer, 2019. "Network Search: Climbing The Job Ladder Faster," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(2), pages 693-720, May.

    More about this item

    Keywords

    On-the-job search; Wage dispersion; Job duration;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cam:camdae:1737. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jake Dyer (email available below). General contact details of provider: https://www.econ.cam.ac.uk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.