The Effect of Search Frictions on Wages

Gerard van den Berg and Aico van Vuuren

No C1-2, 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data

Abstract: Labor market theories that allow for search frictions make marked predictions on the effect of the degree of frictions on wages. Often, the effect is predicted to be negative. Despite the popularity of these theories, this has never been tested. We perform tests with matched worker-firm data. We effectively compare different markets with different degrees of frictions and different market outcomes. The worker data are informative on individual wages and labor market transitions, and this allows for estimation of the degree of search frictions. The firm data are informative on labor productivity. The matched data allow for an assessment of the skill composition in different markets. Together this allows us to investigate how the mean difference between labor productivity and wages in a market depends on the degree of frictions and other determinants. Using within-market variation, we also investigate the extent of (and explanations for) positive assortative matching. We perform separate analyses for The Netherlands and Denmark.

Keywords: labor market imperfections; job durations; productivity; heterogeneity; sorting; assortative matching (search for similar items in EconPapers)
Date: 2002-03
New Economics Papers: this item is included in nep-lab
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http://econpapers.repec.org/cpd/2002/29_vanVuuren.pdf (application/pdf)

Related works:
Journal Article: The effect of search frictions on wages (2010)
Working Paper: The Effect of Search Frictions on Wages (2006)
Working Paper: The Effect of Search Frictions on Wages (2003)
Working Paper: The effect of Search Frictions on Wages (2003)
Working Paper: The effect of search frictions on wages (2003)
Working Paper: The Effect of Search Frictions on Wages (2003)
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