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Sorting and the Output Loss Due to Search Frictions

Author

Listed:
  • Gautier, Pieter A.

    (Vrije Universiteit Amsterdam)

  • Teulings, Coen

    (Utrecht University)

Abstract

We analyze a general search model with on-the-job search and sorting of heterogeneous workers into heterogeneous jobs. This model yields a simple relationship between (i) the unemployment rate, (ii) the value of non-market time, and (iii) the max-mean wage differential. The latter measure of wage dispersion is more robust than measures based on the reservation wage, due to the long left tail of the wage distribution. We estimate this wage differential using data on match quality and allow for measurement error. The estimated wage dispersion and mismatch for the US is consistent with an unemployment rate of 4-6%. We find that without search frictions, output would be between 7.5% and 18.5% higher, depending on whether or not firms can ex ante commit to wage payments.

Suggested Citation

  • Gautier, Pieter A. & Teulings, Coen, 2011. "Sorting and the Output Loss Due to Search Frictions," IZA Discussion Papers 5477, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5477
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sorting and the Output Loss due to Search Frictions
      by Christian Zimmermann in NEP-DGE blog on 2011-03-01 09:27:44

    Citations

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    Cited by:

    1. Xiaoming Cai & Pieter Gautier & Ronald Wolthoff, 2025. "Search, Screening, and Sorting," American Economic Journal: Macroeconomics, American Economic Association, vol. 17(3), pages 205-236, July.
    2. William Hawkins, 2013. "Worker Flows under Mismatch," 2013 Meeting Papers 479, Society for Economic Dynamics.
    3. Schulz, Bastian, 2024. "Labor market dynamics with sorting," Journal of Economic Dynamics and Control, Elsevier, vol. 158(C).
    4. Peter Fredriksson & Lena Hensvik & Oskar Nordström Skans, 2018. "Mismatch of Talent: Evidence on Match Quality, Entry Wages, and Job Mobility," American Economic Review, American Economic Association, vol. 108(11), pages 3303-3338, November.
    5. Daniel Erdsiek, 2016. "Overqualification of graduates: assessing the role of family background [Überqualifikation von Hochschulabsolventen: Welche Rolle spielt der familiäre Hintergrund?]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(3), pages 253-268, November.
    6. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2013. "Mismatch, sorting and wage dynamics," IFS Working Papers W13/16, Institute for Fiscal Studies.
    7. repec:spo:wpmain:info:hdl:2441/78hlmdbud88hhp5vbdddivv2hu is not listed on IDEAS
    8. Erdsiek, Daniel, 2017. "Dynamics of overqualification: Evidence from the early career of graduates," ZEW Discussion Papers 17-020, ZEW - Leibniz Centre for European Economic Research.
    9. repec:spo:wpmain:info:hdl:2441/32h1padvln887b3u0epa07o4ub is not listed on IDEAS
    10. Jesper Bagger & Rasmus Lentz, 2014. "An Empirical Model of Wage Dispersion with Sorting," Economics Working Papers 2014-11, Department of Economics and Business Economics, Aarhus University.
    11. 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.
    12. Griffy, Benjamin & Rabinovich, Stanislav, 2023. "Worker selectivity and fiscal externalities from unemployment insurance," European Economic Review, Elsevier, vol. 156(C).
    13. Gottfries, Axel & Teulings, Coen, 2023. "Returns to on-the-job search and wage dispersion," Labour Economics, Elsevier, vol. 80(C).
    14. José Pulido & Tomasz Swiecki, 2019. "Barriers to Mobility or Sorting? Sources and Aggregate Implications of Income Gaps across Sectors and Locations in Indonesia," 2019 Meeting Papers 1298, Society for Economic Dynamics.
    15. Cai, Xiaoming & Gautier, Pieter A. & Teulings, Coen N. & Watanabe, Makoto, 2014. "Collective versus decentralized wage bargaining and the efficient allocation of resources," Labour Economics, Elsevier, vol. 26(C), pages 34-42.
    16. Benjamin Lochner & Bastian Schulz, 2024. "Firm Productivity, Wages, and Sorting," Journal of Labor Economics, University of Chicago Press, vol. 42(1), pages 85-119.
    17. Rasmus Lentz & Jesper Bagger, 2009. "An Empirical Model of Wage Dispersion with Sorting," 2009 Meeting Papers 964, Society for Economic Dynamics.
    18. Schulz, Bastian & Lochner, Benjamin, 2016. "Labor Market Sorting in Germany," VfS Annual Conference 2016 (Augsburg): Demographic Change 145902, Verein für Socialpolitik / German Economic Association.
    19. Rasmus Lentz & Jesper Bagger, 2015. "An Empirical Model of Wage Dispersion with Sorting," 2015 Meeting Papers 1345, Society for Economic Dynamics.
    20. John Kennes & Daniel le Maire, 2013. "Job Heterogeneity and Coordination Frictions," Economics Working Papers 2013-09, Department of Economics and Business Economics, Aarhus University.
    21. Xiaoming Cai, 2020. "Efficiency Of Wage Bargaining With On‐The‐Job Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1749-1775, November.
    22. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2016. "Matching, Sorting, and Wages," SciencePo Working papers hal-03392023, HAL.
    23. Alexey Gorn, 2021. "The Role of Headhunters in Wage Inequality: It's All about Matching," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 309-346, April.
    24. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2013. "Mismatch, Sorting and Wages Dynamics," SciencePo Working papers hal-03473908, HAL.

    More about this item

    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • 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

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