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Title:The Effect of Search Frictions on Wages PDF Logo
Authors:van den Berg, Gerard J.
van Vuuren, Aico
Issue Date:2003
Series/Report no.:IZA Discussion paper series 805
Abstract:Labor market theories allowing 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. 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 provide 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. We correct for worker self-selection into high-wage jobs. Using within-market variation, we also investigate the extent of (and explanations for) positive assortative matching.
Subjects:labor market imperfections
job durations
productivity
heterogeneity
sorting
assortative matching
JEL:J6
J3
C5
J4
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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