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Title:Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation PDF Logo
Authors:Launov, Andrey
Holzner, Christian
Issue Date:2005
Series/Report no.:Würzburg economic papers 64
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.
Subjects:Search
wage correlation
social returns to education
JEL:J21
J23
J64
Document Type:Working Paper
Appears in Collections:W.E.P. - Würzburg Economic Papers, Lst. f. VWL, Geld u. internat. Wirtschaftsbeziehungen, Universität Würzburg

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