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A Survey on Labor Markets Imperfections in Mexico Using a Stochastic Frontier


  • Villa, Juan M.


It is assumed that observed labor income is the result of three stages across the job search process. From the reservation wage formation, the bargaining between employers and potential employees when the match, and finally a possible additional adjustment once the worker is completely hired. This paper provides a methodological proposal and an intuitive estimation of the wage gain due to the presence of labor market imperfections across those three stages. The part of the wage that is explained by labor markets imperfections is estimated by performing a stochastic frontier model with panel data belonging to the Mexican labor survey -ENOE-. The results suggest that 82.7% of the variance of the wages of the subordinated workers is explained by market imperfections. Moreover, public labor offices and small firms are negatively correlated with their presence.

Suggested Citation

  • Villa, Juan M., 2009. "A Survey on Labor Markets Imperfections in Mexico Using a Stochastic Frontier," MPRA Paper 21201, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:21201

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    References listed on IDEAS

    1. Mavromaras, Kostas & McGuinness, Seamus & O?Leary, Nigel & Sloane, Peter & Fok, Yin King, 2009. "Job Mismatches and Labour Market Outcomes," Papers WP314, Economic and Social Research Institute (ESRI).
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    More about this item


    Labor market imperfections; wage formation; reservation wage; job search; job matching; stochastic frontier; Mexico; ENOE.;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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