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Matching, Sorting and Wages

  • Jean-Marc Robin

    (PSE & UCL)

  • Costas Meghir

    (UCL & IFS)

  • Jeremy Lise

    (UCL & IFS)

We develop an empirical search-matching model with productivity shocks so as to analyze policy interventions in a labour market with heterogeneous agents. To achieve this we develop an equilibrium model of wage determination and employment, which is consistent with key empirical facts. As such our model extends the current literature on equilibrium wage determination with matching and provides a bridge between some of the most prominent macro models and microeconometric research. The model incorporates long-term contracts, on-the-job search and counter-offers, and a vacancy creation and destruction process linked to productivity shocks. Importantly, the model allows for the possibility of assortative matching between workers and jobs, a feature that had been ruled out by assumption in the empirical equilibrium search literature to date.

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Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 180.

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Date of creation: 2009
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Handle: RePEc:red:sed009:180
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Web page: http://www.EconomicDynamics.org/society.htm
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  1. Jesper Bagger & Fran?ois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2014. "Tenure, Experience, Human Capital, and Wages: A Tractable Equilibrium Search Model of Wage Dynamics," American Economic Review, American Economic Association, vol. 104(6), pages 1551-96, June.
  2. Fabien Postel-Vinay & Helene Turon, 2006. "On-the-job Search, Productivity Shocks, and the Individual Earnings Process," 2006 Meeting Papers 5, Society for Economic Dynamics.
  3. John M. Abowd & John Haltiwanger & Julia Lane & Kevin L. McKinney & Kristin Sandusky, 2007. "Technology and the Demand for Skill:An Analysis of Within and Between Firm Differences," NBER Working Papers 13043, National Bureau of Economic Research, Inc.
  4. Gerard J. van den Berg & Aico van Vuuren, 2002. "The Effect of Search Frictions on Wages," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C1-2, International Conferences on Panel Data.
  5. John M. Abowd & Francis Kramarz & Sébastien Pérez-Duarte & Ian Schmutte, 2009. "A Formal Test of Assortative Matching in the Labor Market," NBER Working Papers 15546, National Bureau of Economic Research, Inc.
  6. Low, Hamish & Meghir, Costas & Pistaferri, Luigi, 2007. "Wage Risk and Employment Risk Over the Life Cycle," CEPR Discussion Papers 6187, C.E.P.R. Discussion Papers.
  7. Stéphane Bonhomme & Jean-Marc Robin, 2009. "Assessing the Equalizing Force of Mobility Using Short Panels: France, 1990-2000," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 63-92.
  8. Dey, M. S. & Flinn, C. J., 2000. "An Equilibrium Model of Health Insurance Provision and Wage Determination," Working Papers 00-18, C.V. Starr Center for Applied Economics, New York University.
  9. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, 03.
  10. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  11. Gruetter, Max & Lalive, Rafael, 2009. "The importance of firms in wage determination," Labour Economics, Elsevier, vol. 16(2), pages 149-160, April.
  12. Alp E. Atakan, 2006. "Assortative Matching with Explicit Search Costs," Econometrica, Econometric Society, vol. 74(3), pages 667-680, 05.
  13. Jan Eeckhout & Philipp Kircher, 2011. "Identifying Sorting--In Theory," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 872-906.
  14. Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
  15. Fatih Guvenen, 2007. "Learning Your Earning: Are Labor Income Shocks Really Very Persistent?," American Economic Review, American Economic Association, vol. 97(3), pages 687-712, June.
  16. Joseph G. Altonji & Nicolas Williams, 1997. "Do Wages Rise with Job Seniority? A Reassessment," NBER Working Papers 6010, National Bureau of Economic Research, Inc.
  17. Jesper Bagger & Rasmus Lentz, 2008. "An Equilibrium Model of Wage Dispersion with Sorting," 2008 Meeting Papers 271, Society for Economic Dynamics.
  18. Mendes, Rute & van den Berg, Gerard J. & Lindeboom, Maarten, 2007. "An Empirical Assessment of Assortative Matching in the Labor Market," IZA Discussion Papers 3053, Institute for the Study of Labor (IZA).
  19. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
  20. Lentz, Rasmus, 2010. "Sorting by search intensity," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1436-1452, July.
  21. Robert H. Topel & Michael P. Ward, 1988. "Job Mobility and the Careers of Young Men," NBER Working Papers 2649, National Bureau of Economic Research, Inc.
  22. Meghir, Costas & Pistaferri, Luigi, 2002. "Income Variance Dynamics and Heterogeneity," CEPR Discussion Papers 3632, C.E.P.R. Discussion Papers.
  23. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
  24. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 492-533, July.
  25. Chernozhukov, Victor & Hong, Han, 2003. "An MCMC approach to classical estimation," Journal of Econometrics, Elsevier, vol. 115(2), pages 293-346, August.
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