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Search Frictions and Wage Dispersion

Author

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  • Iourii Manovskii

    (University of Pennsylvania)

  • Marcus Hagedorn

    (University of Zurich)

Abstract

We propose a way to measure the contribution of search frictions to the level of wage dispersion observed in the data. Using the data from the 1979 cohort of the National Longitudinal Survey of Youth we find that the variance of match qualities between workers and employers accounts for about 6% of the variance of log wages. Our method relies on a minimal set of assumptions, the main among them being that match quality is constant over the duration of a job. We show that this assumption can be verified empirically and is supported by the data.

Suggested Citation

  • Iourii Manovskii & Marcus Hagedorn, 2011. "Search Frictions and Wage Dispersion," 2011 Meeting Papers 1195, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:1195
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    References listed on IDEAS

    as
    1. 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, March.
    2. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2005. "Insurance within the Firm," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1054-1087, October.
    3. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 437-459.
    4. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    5. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
    6. Joseph G. Altonji & Nicolas Williams, 2005. "Do Wages Rise with Job Seniority? A Reassessment," ILR Review, Cornell University, ILR School, vol. 58(3), pages 370-397, April.
    7. Giuseppe Moscarini & Kaj Thomsson, 2008. "Occupational and Job Mobility in the US," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 807-836, March.
    8. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    9. repec:bla:jorssc:v:30:y:1981:i:1:p:32-40 is not listed on IDEAS
    10. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
    11. Gadi Barlevy, 2008. "Identification of Search Models using Record Statistics," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 29-64.
    12. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
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