Quantifying the Contribution of Search to Wage Inequality

Volker Tjaden and Felix Wellschmied

American Economic Journal: Macroeconomics, 2014, vol. 6, issue 1, 134-61

Abstract: We empirically establish that one-third of job transitions leads to wage losses. Using a quantitative on-the-job search model, we find that 60 percent of them are movements down the job ladder. Accounting for them, our baseline calibration matches the large residual wage inequality in US data while attributing only 13.7 percent of overall wage inequality to the presence of search frictions in the labor market. We can trace the difference between ours and previous much higher estimates to our explicit modeling of nonvalue improving job-to-job transitions.

JEL-codes: J24 J31 J64 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/mac.6.1.134
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Citations: View citations in EconPapers (46)

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