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Wage distributions and wage dynamics in Europe and the US : lessons from a simple job search model

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Abstract

Job search models of the labor market establish a very tight correspondance between the determinants of labor turnover and individual wage dynamics on one hand, and the determinants of wage dispersion on the other. This paper offers a systematic examination of wether this correspondance is present in the data by estimating a rudimentary partial equilibrium job search model on the ECHP database, from which we extract a 1996-1999 panel of individual worker data from 12 different European countries. We find that our basic job search model fits the data surprisingly well. This also allows us to point a number of interesting emprirical regularities about wage distributions. Finally, our results suggest that cross-sectional data on individual wages contain the basic information needed to obtain reliable estimates of the "search frictions" parameters of a canonical job search model.

Suggested Citation

  • Grégory Jolivet & Fabien Postel-Vinay & Jean-Marc Robin, 2003. "Wage distributions and wage dynamics in Europe and the US : lessons from a simple job search model," Research Unit Working Papers 0302, Laboratoire d'Economie Appliquee, INRA.
  • Handle: RePEc:lea:leawpi:0302
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    Cited by:

    1. Wasmer, Etienne, 2002. "Interpreting Europe and US Labor Markets Differences: The Specificity of Human Capital Investments," IZA Discussion Papers 549, Institute for the Study of Labor (IZA).
    2. Drago, Francesco, 2006. "Career Consequences of Hyperbolic Time Preferences," IZA Discussion Papers 2113, Institute for the Study of Labor (IZA).

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    Keywords

    Labor market frictions; wage distribution; wage dynamics; job mobility;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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