IDEAS home Printed from
   My bibliography  Save this paper

Wage Dispersion with Heterogeneous Firm Technologies and Worker Abilities: An Equilibrium Job Search Model for Matched Employer-Employee Data


  • Postel Vinay Fabien
  • Robin Jean Marc



An equilibrium job search model with on-the-job-search is presented and solved, in which we allow firms to implement optimal wage posting strategies in the sense that they leave no rent to their employees and counter the offers received by their employees from competing firms. Unobserved worker productive heterogeneity is introduced in the form of cross-worker differences in a `competence' parameter. On the other side of the market, firms also are heterogeneous with respect to their (observable) marginal productivity of labor. The theoretical model can be solved in closed-form and typically delivers a hump-shaped aggregate earnings distribution that reflects both firm- and worker-heterogeneity. The fit to the observed earnings distributions is very good. The model also fits the observed distributions of firm sizes in the populations of workers and firms. Finally, it delivers both between- and within-firm endogenous wage dispersion. The structural model is estimated using matched employer and employee French panel data. Its fit to the data is good. We then use the results for two applications. The first one is a decomposition of the log-wage means and variances into additive firm and person effects. We find that the share explained by the person effect varies across skill groups, and is generally much smaller than what was found in previous analyses of the same panel. Specifically, this share lies close to 50% for high-skilled white collars, and quickly decreases to 0% as the observed skill level decreases. The second application is a look at the anatomy of the `matching technology'. We find evidence of nonmonotonic relationships between firm sizes, productivities and recruiting efforts.

Suggested Citation

  • Postel Vinay Fabien & Robin Jean Marc, 2000. "Wage Dispersion with Heterogeneous Firm Technologies and Worker Abilities: An Equilibrium Job Search Model for Matched Employer-Employee Data," Research Unit Working Papers 0008, Laboratoire d'Economie Appliquee, INRA.
  • Handle: RePEc:lea:leawpi:0008

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Labor market frictions; wage dispersion; log wage variance decomposition.;

    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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lea:leawpi:0008. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Madeleine Roux). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.