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Listed author(s):
  • Espen Moen

    (Norwegian Business School-BI)

  • Anna Godøy

    (The Ragnar Frisch Centre for)

In search theory, an important distinction can be drawn between models with competitive search and with random search; empirical work on job search models overwhelmingly assume random search. This paper uses linked register data on workers and rms to explore patterns of wages at job to job transitions. We argue that models with random search provide insufficient structure to match the tight correspondence in the data between the rm wage in the old and the new job. In an archetypical model with directed on-the-job search, we nd that the pure job ladder equilibrium of this model is also unable to account for observed wage patterns, this time by predicting too little variation in the conditional distribution of new wages after a job change. Next, we present a model where workers and firms meet through both directed and undirected search; we call this mixed search. This model is qualitatively consistent with patterns of wages across job-to-job transitions with wage gains. To account for wage cuts at job-to-job transitions, an extended model version makes search behavior contingent on realized match specific productivity, revealed to workers and firms after the match is formed.

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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 857.

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Date of creation: 2013
Handle: RePEc:red:sed013:857
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  1. 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.
  2. Benjamin Lester, 2011. "Information and Prices with Capacity Constraints," American Economic Review, American Economic Association, vol. 101(4), pages 1591-1600, June.
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