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Human Capital Accumulation and Labour Market Equilibrium

  • Burdett, Ken

    ()

    (University of Pennsylvania)

  • Carrillo-Tudela, Carlos

    ()

    (University of Essex)

  • Coles, Melvyn

    ()

    (University of Essex)

We analyse an equilibrium labour market with on-the-job search and experience effects (where workers learn-by-doing). The analysis yields a standard Mincer wage equation with worker fixed effects and endogenously determined firm fixed effects. It shows that learning-by-doing increases equilibrium wage dispersion consistent with the data. Equilibrium sorting - where over time more experienced workers also tend to find and quit to better paid employment - has a significant impact on wage inequality. As the model yields a cross section distribution of wages paid with the 'right' structure (the density of wages paid is single peaked with a 'fat' Pareto right tail) and yields the 'right' time profile of worker wage outcomes (the initial 10 years of a worker's career are characterised by several job changes and rapid wage growth) it yields a new, coherent statistical structure for future applied work.

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File URL: http://ftp.iza.org/dp4215.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4215.

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Length: 29 pages
Date of creation: Jun 2009
Date of revision:
Publication status: published in: International Economic Review, 2011, 52 (3), 657 - 677
Handle: RePEc:iza:izadps:dp4215
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  1. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00357753, HAL.
  2. Jesper Bager & Francois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation," 2006 Meeting Papers 679, Society for Economic Dynamics.
  3. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2007. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," NBER Working Papers 13674, National Bureau of Economic Research, Inc.
  4. Joseph G. Altonji & Nicolas Williams, 2005. "Do Wages Rise with Job Seniority? A Reassessment," ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
  5. Robert E. Hall & Paul R. Milgrom, 2007. "The Limited Influence of Unemployment on the Wage Bargain," Levine's Bibliography 321307000000000135, UCLA Department of Economics.
  6. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
  7. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
  8. Grégory Jolivet & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00279066, HAL.
  9. Bunzel, H. & Christensen, B.J. & Kiefer, N.M. & Korsholm, L., 1999. "Equilibrium Search with Human Capital Accumulation," Papers 99-11, Centre for Labour Market and Social Research, Danmark-.
  10. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 437-59, July.
  11. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  12. Gadi Barlevy, 2008. "Identification of Search Models using Record Statistics," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 29-64.
  13. Bontemps, Christian & Robin, Jean-Marc & Van den Berg, Gerard J, 1999. "An Empirical Equilibrium Job Search Model with Search on the Job and Heterogeneous Workers and Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1039-74, November.
  14. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 989-1016, November.
  15. Ken Burdett & Melvyn Coles, 2003. "Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 71(5), pages 1377-1404, 09.
  16. Carlos Carrillo-Tudela, 2009. "An Equilibrium Search Model with Optimal Wage-Experience Contracts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 108-128, January.
  17. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
  18. Robert H. Topel & Michael P. Ward, 1988. "Job Mobility and the Careers of Young Men," NBER Working Papers 2649, National Bureau of Economic Research, Inc.
  19. Rubinstein, Yona & Weiss, Yoram, 2006. "Post Schooling Wage Growth: Investment, Search and Learning," Handbook of the Economics of Education, Elsevier.
  20. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00357751, HAL.
  21. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
  22. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  23. repec:inr:wpaper:155908 is not listed on IDEAS
  24. Sherwin Rosen, 1972. "Learning and Experience in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 7(3), pages 326-342.
  25. Christian Bontemps & Jean-Marc Robin & Gérard J. Van den Berg, 1999. "An Empirical Equilibrium Job Search Model With Search on the Job and Heterogeneous Workers and Firms," Post-Print hal-00357757, HAL.
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