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The effect of Search Frictions on Wages

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  • Gérard J, Van den Berg

    (Crest)

  • Aico Van Vuuren

    (Crest)

Abstract

Labor market theories allowing for search frictions make marked predic-tions on the e ect of the degree of frictions on wages. Often, the e ect ispredicted to be negative. Despite the popularity of these theories, this hasnever been tested. We perform tests with matched worker- rm data. Theworker data are informative on individual wages and labor market transi-tions, and this allows for estimation of the degree of search frictions. The rm data are informative on labor productivity. The matched data pro-vide the skill composition in di erent markets. Together this allows us toinvestigate how the mean di erence between labor productivity and wagesin a market depends on the degree of frictions and other determinants. Wecorrect for worker self-selection into high-wage jobs. Using within-marketvariation, we also investigate the extent of (and explanations for) positiveassortative matching.

Suggested Citation

  • Gérard J, Van den Berg & Aico Van Vuuren, 2003. "The effect of Search Frictions on Wages," Working Papers 2003-29, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2003-29
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    3. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2016. "Matching, Sorting and Wages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 63-87, January.
    4. Webber, Douglas A., 2015. "Firm market power and the earnings distribution," Labour Economics, Elsevier, vol. 35(C), pages 123-134.
    5. Philipp Ehrl, 2014. "High-wage workers and high-productivity firms - a regional view on matching in Germany," Working Papers 149, Bavarian Graduate Program in Economics (BGPE).
    6. Weinstein, Russell, 2018. "Employer screening costs, recruiting strategies, and labor market outcomes: An equilibrium analysis of on-campus recruiting," Labour Economics, Elsevier, vol. 55(C), pages 282-299.
    7. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2013. "Mismatch, sorting and wage dynamics," IFS Working Papers W13/16, Institute for Fiscal Studies.
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    9. Pieter Gautier & Paul Muller & Bas van der Klaauw & Michael Rosholm & Michael Svarer, 2018. "Estimating Equilibrium Effects of Job Search Assistance," Journal of Labor Economics, University of Chicago Press, vol. 36(4), pages 1073-1125.
    10. Picchio, Matteo & van Ours, Jan C., 2011. "Market imperfections and firm-sponsored training," Labour Economics, Elsevier, vol. 18(5), pages 712-722, October.
    11. Paulo Guimarães & Pedro Portugal & Sónia Torres, 2013. "The sources of wage variation: a three-way high-dimensional fixed effects regression model," Working Papers w201309, Banco de Portugal, Economics and Research Department.
    12. repec:hal:journl:hal-01070442 is not listed on IDEAS
    13. Garloff, Alfred, 2010. "Minimum wages, wage dispersion and unemployment in search models : a review," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 43(2), pages 145-167.
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    15. Garloff Alfred & Fitzenberger Bernd, 2007. "Labor Market Transitions and the Wage Structure in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 227(2), pages 115-152, April.
    16. Garloff, Alfred, 2003. "Lohndispersion und Arbeitslosigkeit: Neuere Ansätze in der Suchtheorie," ZEW Discussion Papers 03-60, ZEW - Leibniz Centre for European Economic Research.
    17. repec:hal:spmain:info:hdl:2441/6ggbvnr6munghes9od0s108ro is not listed on IDEAS
    18. Garloff, Alfred, 2010. "Minimum wages, wage dispersion and unemployment in search models : a review," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 43(2), pages 145-167.
    19. Daniel R. Ringo, 2021. "Home ownership as a labor market friction," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 111-133, March.
    20. Paul Frijters & Michael A. Shields, 2010. "Are Early Educational Choices Affected by Unemployment Benefits? New Theory," Discussion Papers Series 447, School of Economics, University of Queensland, Australia.
    21. repec:hal:wpspec:info:hdl:2441/6ggbvnr6munghes9od0s108ro is not listed on IDEAS
    22. Oliveira, Paulo Felipe de & Carvalho, José Raimundo, 2016. "Regional Labor Market Differences in Brazil and Search Frictions: Some Structural Estimates," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 70(1), March.
    23. Jhon Jair Gonzalez Pulgarin, 2023. "Do firing costs change wages of low- and high-educated workers differently?," French Stata Users' Group Meetings 2023 28, Stata Users Group.

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    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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