Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/33613
Authors: 
Holzner, Christian
Launov, Andrey
Year of Publication: 
2005
Series/Report no.: 
IZA Discussion Papers 1904
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 to education 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

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