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Job search, human capital and wage inequality

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  • Carrillo-Tudela, Carlos

Abstract

This paper constructs and quantitatively assesses an equilibrium search model with on-the- job search and general human capital accumulation. In the model workers differ in their innate abilities and firms in their productivities. Wages are dispersed because of search frictions and workers’ productivity differentials. Using the (log) wage variance decomposition implied by the model I show that wage inequality among low skilled workers is mostly driven by differences in their productivities. Among medium skilled workers, productivity differentials and search frictions are equally important. The model reproduces the observed cross-sectional wage distribution, the average wage-experience profile and the observed Mean-min ratio.

Suggested Citation

  • Carrillo-Tudela, Carlos, 2012. "Job search, human capital and wage inequality," ISER Working Paper Series 2012-23, Institute for Social and Economic Research.
  • Handle: RePEc:ese:iserwp:2012-23
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    File URL: https://www.iser.essex.ac.uk/research/publications/working-papers/iser/2012-23.pdf
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    References listed on IDEAS

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    Cited by:

    1. Schwartz, J., 2015. "Optimal unemployment insurance: When search takes effort and money," Labour Economics, Elsevier, vol. 36(C), pages 1-17.
    2. Bowlus, Audra J. & Liu, Huju, 2013. "The contributions of search and human capital to earnings growth over the life cycle," European Economic Review, Elsevier, vol. 64(C), pages 305-331.
    3. Xiao, Chaoqun & Tang, Wansheng & Zhao, Ruiqing & Zhou, Chi, 2013. "Equilibrium search with heterogeneous firms, workers and endogenous human capital," MPRA Paper 52136, University Library of Munich, Germany.
    4. Volker Tjaden & Felix Wellschmied, 2011. "Exploring the Causes of Frictional Wage Dispersion," Bonn Econ Discussion Papers bgse04_2011, University of Bonn, Germany.

    More about this item

    JEL classification:

    • 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
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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