Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71898
Authors: 
Tjaden, Volker
Wellschmied, Felix
Year of Publication: 
2011
Series/Report no.: 
Bonn Econ Discussion Papers 04/2011
Abstract: 
Standard search models are inconsistent with the amount of frictional wage dispersion found in U.S. data. We resolve this apparent puzzle by modeling skill development (learning by doing on the job, skill loss during unemployment) and duration dependence in unemployment benefits in a random on the job search model featuring two-sided heterogeneity. The model's key parameters are calibrated using micro data on employment mobility and wages from the Survey of Income and Program Participation (SIPP). Our model is consistent with the amount of frictional wage dispersion found in the data. Skill development on the job is the most important driver behind this result. Meanwhile, firm heterogeneity never accounts for more than 20% of overall wage inequality within an age cohort.
Subjects: 
Frictional wage dispersion
Search model
Heterogeneity
JEL: 
J24
J31
J64
Document Type: 
Working Paper

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