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How Large are Search Frictions?

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  • Gautier, Pieter A
  • Teulings, Coen N

Abstract

This Paper presents strong evidence for the concavity of wages in job and worker characteristics by adding second order terms to a Mincerian earnings function for six OECD countries. Under a standard normality assumption, this concavity cannot be attributed to unobserved components in those characteristics. An assignment model with search frictions provides a parsimonious explanation for our findings. This model yields two restrictions on the coefficients, which fit the data very well. The impact of search frictions on wages is large. Our results relate to the literature on industry wage differentials, on structural identification in hedonic models, and on wage posting versus Nash bargaining in search models.

Suggested Citation

  • Gautier, Pieter A & Teulings, Coen N, 2003. "How Large are Search Frictions?," CEPR Discussion Papers 3861, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3861
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    References listed on IDEAS

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    More about this item

    Keywords

    assignment; search; wages;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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