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The effect of Search Frictions on Wages

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  • Gérard J, Van den Berg

    (Crest)

  • Aico Van Vuuren

    (Crest)

Abstract

Labor market theories allowing for search frictions make marked predic-tions on the e ect of the degree of frictions on wages. Often, the e ect ispredicted to be negative. Despite the popularity of these theories, this hasnever been tested. We perform tests with matched worker- rm data. Theworker data are informative on individual wages and labor market transi-tions, and this allows for estimation of the degree of search frictions. The rm data are informative on labor productivity. The matched data pro-vide the skill composition in di erent markets. Together this allows us toinvestigate how the mean di erence between labor productivity and wagesin a market depends on the degree of frictions and other determinants. Wecorrect for worker self-selection into high-wage jobs. Using within-marketvariation, we also investigate the extent of (and explanations for) positiveassortative matching.

Suggested Citation

  • Gérard J, Van den Berg & Aico Van Vuuren, 2003. "The effect of Search Frictions on Wages," Working Papers 2003-29, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2003-29
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    2. Weinstein, Russell, 2018. "Employer screening costs, recruiting strategies, and labor market outcomes: An equilibrium analysis of on-campus recruiting," Labour Economics, Elsevier, vol. 55(C), pages 282-299.
    3. 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.
    4. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2013. "Mismatch, Sorting and Wages Dynamics," Sciences Po publications info:hdl:2441/32h1padvln8, Sciences Po.
    5. Paulo Guimarães & Pedro Portugal & Sónia Torres & John T. Addison, 2013. "The sources of wage variation: a three-way high-dimensional fixed effects regression model," Working Papers w201309, Banco de Portugal, Economics and Research Department.
    6. repec:spo:wpecon:info:hdl:2441/6ggbvnr6munghes9od0s108ro is not listed on IDEAS
    7. Picchio, Matteo & van Ours, Jan C., 2011. "Market imperfections and firm-sponsored training," Labour Economics, Elsevier, vol. 18(5), pages 712-722, October.
    8. Webber, Douglas A., 2015. "Firm market power and the earnings distribution," Labour Economics, Elsevier, vol. 35(C), pages 123-134.
    9. Pieter Gautier & Paul Muller & Bas van der Klaauw & Michael Rosholm & Michael Svarer, 2018. "Estimating Equilibrium Effects of Job Search Assistance," Journal of Labor Economics, University of Chicago Press, vol. 36(4), pages 1073-1125.
    10. Fontaine, François, 2008. "Why are similar workers paid differently? the role of social networks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3960-3977, December.
    11. Mendes, Rute & van den Berg, Gerard J. & Lindeboom, Maarten, 2010. "An empirical assessment of assortative matching in the labor market," Labour Economics, Elsevier, vol. 17(6), pages 919-929, December.
    12. Garloff, Alfred, 2003. "Lohndispersion und Arbeitslosigkeit: Neuere Ansätze in der Suchtheorie," ZEW Discussion Papers 03-60, ZEW - Leibniz Centre for European Economic Research.
    13. Paul Frijters & Michael A. Shields, 2010. "Are Early Educational Choices Affected by Unemployment Benefits? New Theory," Discussion Papers Series 447, School of Economics, University of Queensland, Australia.

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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