Unemployment history and frictional wage dispersion

Victor Ortego-Marti

Journal of Monetary Economics, 2016, vol. 78, issue C, 5-22

Abstract: Recent evidence shows that baseline search models struggle to match the observed levels of wage dispersion. This paper studies a random matching search model with human capital losses during unemployment. Wage dispersion increases, as workers accept lower wages to avoid long unemployment spells. The model explains between a third and half of the observed residual wage dispersion. When adding on-the-job search, the model accounts for all of the residual wage dispersion and generates substantial dispersion even for high values of non-market time. The paper thus addresses the trade-off between explaining frictional wage dispersion and the cyclical behavior of unemployment.

Keywords: Search and matching; Frictional wage dispersion; Unemployment history; Skill loss; Unemployment volatility (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393215001373
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Unemployment History and Frictional Wage Dispersion (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:78:y:2016:i:c:p:5-22

DOI: 10.1016/j.jmoneco.2015.12.002

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().