An Empirical Framework For Matching With Imperfect Competition

Mons Chan, Kory Kroft, Elena Mattana and Ismael Mourifié

No 32493, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper builds, identifies and estimates a model of the labor market that features strategic interactions in wage setting and two-sided heterogeneity in order to shed light on the sources of wage inequality. We provide a tractable characterization of the model equilibrium and demonstrate its existence and uniqueness. This characterization of the equilibrium allows us to derive a rich set of comparative statics and to gauge the relative contributions of worker skill, preference for amenities and strategic interactions to equilibrium wage inequality. Using instrumental variables, we establish identification of labor demand and supply parameters and estimate them using matched employer-employee data from Denmark. Using our estimated structural model, we perform a series of counterfactual analyses in order to provide a quantitative evaluation of the main sources of wage inequality in Denmark.

JEL-codes: J0 J20 J3 J31 J42 (search for similar items in EconPapers)
Date: 2024-05
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