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Labor markets, wage Inequality, and hiring selection

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  • Pizzo, Alessandra
  • Villena-Roldán, Benjamin

Abstract

Employers hire more selectively between heterogeneous productivity workers when applicants’ queues are longer. Consistently, CPS data reveal a positive and concave relation between unemployment rates and wage inequality. We rationalize intuition and evidence altogether using a nonsequential search model in which selective hiring stretches out the right tail of the wage distribution and compresses the left one. Using GMM estimated parameters, we show that mean worker productivity distribution shifts are consistent with the evidence. Welfare analysis suggests that regressive taxation may enhance efficiency because expected good matches stimulate vacancies, creating a positive externality for other job seekers.

Suggested Citation

  • Pizzo, Alessandra & Villena-Roldán, Benjamin, 2024. "Labor markets, wage Inequality, and hiring selection," MPRA Paper 120281, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:120281
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    References listed on IDEAS

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    More about this item

    Keywords

    Nonsequential search; Hiring; Inequality; Unemployment; Worker Flows; Efficiency;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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