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Job Search, Bargaining, and Wage Dynamics

  • Shintaro Yamaguchi

This paper constructs and estimates a model of strategic wage bargaining with on-the-job search to explore three different components of wages: general human capital, match-specific capital, and outside option. As the workers find better job opportunities, the current employer has to compete with outside firms to retain them. This between-firm competition results in wage growth even when productivity remains the same. The model is estimated by a simulated minimum distance estimator and data from the NLSY79. The results indicate that the improved value of outside option raises wages of ten-year-experienced workers by 16%.

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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-026.

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Date of creation: Jan 2009
Date of revision:
Handle: RePEc:hst:ghsdps:gd08-026
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  19. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 437-459.
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