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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

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    References listed on IDEAS

    1. Luc Behaghel & Nathalie Greenan, 2005. "Training and Age-Biased Technical Change : Evidence from French Micro Data," Working Papers 2005-06, Center for Research in Economics and Statistics.
    2. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 339-376.
    3. James Heckman, 2011. "Policies to foster human capital," Educational Studies, Higher School of Economics, issue 3, pages 73-137.
    4. David Blanchflower & Simon Burgess, 1998. "New Technology And Jobs: Comparative Evidence From A Two Country Study," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 5(2-4), pages 109-138.
    5. Michel Gollac & Nathalie Greenan & Sylvie Hamon-Cholet, 2000. "L'informatisation de l'« ancienne » économie : nouvelles machines, nouvelles organisations et nouveaux travailleurs," Économie et Statistique, Programme National Persée, vol. 339(1), pages 171-201.
    6. repec:dau:papers:123456789/10093 is not listed on IDEAS
    7. Patrick Aubert & Eve Caroli & Muriel Roger, 2006. "New technologies, organisation and age: firm-level evidence," Economic Journal, Royal Economic Society, vol. 116(509), pages 73-93, February.
    8. Nathalie Greenan, 2003. "Organisational change, technology, employment and skills: an empirical study of French manufacturing," Cambridge Journal of Economics, Oxford University Press, vol. 27(2), pages 287-316, March.
    9. P. Aubert & E. Caroli & M. Roger, 2004. "New Technologies, Workplace Organisation and the Age Structure of the Workforce: Firm-Level Evidence," Documents de Travail de la DESE - Working Papers of the DESE g2004-07, Institut National de la Statistique et des Etudes Economiques, DESE.
    10. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    11. Eve Caroli & John Van Reenen, 2001. "Skill-Biased Organizational Change? Evidence from A Panel of British and French Establishments," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1449-1492.
    12. Borghans,Lex & Weel,Bas,ter, 2002. "Do Older Workers Have More Trouble Using a Computer Than Younger Workers?," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    13. P. Biscourp & B. Crépon & T. Heckel & N. Riedinger, 2002. "How do firms respond to cheaper computers? Microeconometric evidence for France based on a production function approach," Documents de Travail de la DESE - Working Papers of the DESE g2002-05, Institut National de la Statistique et des Etudes Economiques, DESE.
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    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

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