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On the Job Search and the Wage Distribution

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Author Info
Bent Jesper Christensen (University of Aarhus)
Rasmus Lentz (Boston University)
Dale T. Mortensen (Northwestern University)
George R. Neumann (University of Iowa)
Axel Werwatz (Geman Institute for Economic Research, Berlin)

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Abstract

Estimates of the structural parameters of a job separation model derived from the theory of on-the-job search are reported in this paper. Given that each employer pays the same wage to observably equivalent workers but wages are dispersed across employers, the theory implies that an employer's separation flow is the sum of an exogenous outflow unrelated to the wage paid and a job-to-job flow that decreases with the employer's wage. The specification estimated allows worker search effort to depend on the wage currently earned. The empirical results imply that search effort declines with the wage paid, as the theory predicts, using Danish IDA data for the years 1994-1995. Furthermore, the estimates for the full sample and four occupational sub-samples explain the employment effect, defined as the horizontal difference between the distribution of wages earned and the distribution of wages offered.

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Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2004-09.

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Length: 36 pages
Date of creation: Mar 2003
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Handle: RePEc:kud:kuieca:2004_09

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  1. Bowlus, Audra J & Kiefer, Nicholas M & Neumann, George R, 2001. "Equilibrium Search Models and the Transition from School to Work," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 317-43, May.
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  2. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Katharine G. Abraham & Henry S. Farber, 1987. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December. [Downloadable!] (restricted)
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  5. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
  6. Hoyt Bleakley & Ann E. Ferris & Jeffrey C. Fuhrer, 1999. "New data on worker flows during business cycles," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 49-76. [Downloadable!]
  7. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 989-1016, November. [Downloadable!] (restricted)
  8. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier. [Downloadable!] (restricted)
  9. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
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  10. Altonji, Joseph G & Shakotko, Robert A, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Blackwell Publishing, vol. 54(3), pages 437-59, July. [Downloadable!] (restricted)
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  11. Christian Bontemps & Jean-Marc Robin & Gerard J. van den Berg, 1997. "Equilibrium Search with Productivity Dispersion: Theory and Estimation," Tinbergen Institute Discussion Papers 97-081/3, Tinbergen Institute.
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  12. Bontemps, C. & Robin, J.M. & van den Berg, G.J., 1998. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Non-Parametric Estimation," Papers 98-07, Centre for Labour Market and Social Research, Danmark-.
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  13. 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 145-76, February. [Downloadable!] (restricted)
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  14. Mattila, J Peter, 1974. "Job Quitting and Frictional Unemployment," American Economic Review, American Economic Association, vol. 64(1), pages 235-39, March. [Downloadable!] (restricted)
  15. Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier. [Downloadable!] (restricted)
  16. Robert Gibbons & Lawrence F. Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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