Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation

Andrey Launov () and Christian Holzner

No 64, W.E.P. - Würzburg Economic Papers from University of Würzburg, Department of Economics

Abstract: We introduce different skill groups and production functions into the Burdett-Mortensen equilibrium search model. Supermodularity in the production process leads to a positive intrafirm wage correlation between skill groups. Theory implies that increasing returns to scale can lead to a unimodal earnings density with a decreasing right tail even in the absence of productivity dispersion. Our empirical results indicate economy-wide increasing returns to scale. We use the structural estimates of the production parameters to investigate whether private returns toeducation equal social returns. Our estimates suggest a positive welfare effect from increasing the share of medium-skilled agents in the workforce.

Keywords: Search; wage correlation; social returns to education (search for similar items in EconPapers)
JEL-codes: J21 J23 J64 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation (2005)
Working Paper: Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation (2005)
Working Paper: Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation (2005)
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