Wage Inequality

Ken Burdett, Carlos Carrillo-Tudela and Melvyn Coles
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Ken Burdett: University of Pennsylvania

No 42, Working Papers from Peruvian Economic Association

Abstract: The objective of this paper is to study why are some workers paid more than others. To do so we construct and quantitatively assess an equilibrium search model with on-the-job search, general human capital accumulation and two sided heterogeneity. In the model workers differ in abilities and firms differ in their productivities. The model generates a simple (log) wage variance decomposition that is used to measure the importance of firm and worker productivity differentials, frictional wage dispersion and workers' sorting dynamics. We calibrate the model using a sample of young workers for the UK. We show that heterogeneity among firms generates a lot of wage inequality. Among low skilled workers job ladder effects are small, most of the impact of experience on wages is due to learning-by-doing. High skilled workers are much more mobile. Job ladder effects have sizeable impact.

Keywords: Job search; human capital accumulation; wage inequality; turnover (search for similar items in EconPapers)
JEL-codes: J41 J42 J63 J64 (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-dge and nep-hrm
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:apc:wpaper:2015-042

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