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Sorting and the output loss due to search frictions

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  • Coen Teulings

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Pieter Gautier

Abstract

The authors analyze a general search model with on-the-job search and sorting of heterogeneous workers into heterogeneous jobs. This model yields a simple relationship between (i) the unemployment rate, (ii) the value of non-market time, and (iii) the max-mean wage differential. The latter measure of wage dispersion is more robust than measures based on the reservation wage, due to the long left tail of the wage distribution. We estimate this wage differential using data on match quality and allow for measurement error. The estimated wage dispersion and mismatch for the US is consistent with an unemployment rate of 5%. Finally, we find that without search frictions, output would be 6.6% higher.

Suggested Citation

  • Coen Teulings & Pieter Gautier, 2012. "Sorting and the output loss due to search frictions," CPB Discussion Paper 206.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:206.rdf
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sorting and the Output Loss due to Search Frictions
      by Christian Zimmermann in NEP-DGE blog on 2011-03-01 09:27:44

    Citations

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    Cited by:

    1. Xiaoming Cai & Pieter Gautier & Ronald Wolthoff, 2021. "Search, Screening and Sorting," Working Papers tecipa-699, University of Toronto, Department of Economics.
    2. William Hawkins, 2013. "Worker Flows under Mismatch," 2013 Meeting Papers 479, Society for Economic Dynamics.
    3. Daniel Erdsiek, 2016. "Overqualification of graduates: assessing the role of family background [Überqualifikation von Hochschulabsolventen: Welche Rolle spielt der familiäre Hintergrund?]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(3), pages 253-268, November.
    4. 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.
    5. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2013. "Mismatch, Sorting and Wage Dynamics," Cowles Foundation Discussion Papers 1886, Cowles Foundation for Research in Economics, Yale University.
    6. José Pulido & Tomasz Swiecki, 2019. "Barriers to Mobility or Sorting? Sources and Aggregate Implications of Income Gaps across Sectors and Locations in Indonesia," 2019 Meeting Papers 1298, Society for Economic Dynamics.
    7. Lochner, Benjamin & Schulz, Bastian, 2020. "Firm productivity, wages, and sorting," IAB Discussion Paper 202004, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Rasmus Lentz & Jesper Bagger, 2009. "An Empirical Model of Wage Dispersion with Sorting," 2009 Meeting Papers 964, Society for Economic Dynamics.
    9. 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.
    10. Cai, Xiaoming & Gautier, Pieter A. & Teulings, Coen N. & Watanabe, Makoto, 2014. "Collective versus decentralized wage bargaining and the efficient allocation of resources," Labour Economics, Elsevier, vol. 26(C), pages 34-42.
    11. Alexey Gorn, 2021. "The Role of Headhunters in Wage Inequality: It's All about Matching," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 309-346, April.
    12. Erdsiek, Daniel, 2017. "Dynamics of overqualification: Evidence from the early career of graduates," ZEW Discussion Papers 17-020, ZEW - Leibniz Centre for European Economic Research.
    13. 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.
    14. Rasmus Lentz & Jesper Bagger, 2015. "An Empirical Model of Wage Dispersion with Sorting," 2015 Meeting Papers 1345, Society for Economic Dynamics.
    15. Xiaoming Cai, 2020. "Efficiency Of Wage Bargaining With On‐The‐Job Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1749-1775, November.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • 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

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