Mismatch, Sorting and Wage Dynamics

45 Pages Posted: 18 Jan 2013

See all articles by Jeremy Lise

Jeremy Lise

University College London

Costas Meghir

Yale University; Yale University - Cowles Foundation; Institute for Fiscal Studies (IFS); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Jean-Marc Robin

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); French National Institute for Agricultural Research (INRA); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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Date Written: January 2013

Abstract

We develop an empirical search-matching model which is suitable for analyzing the wage, employment and welfare impact of regulation in a labor market with heterogeneous workers and jobs. To achieve this we develop an equilibrium model of wage determination and employment which extends the current literature on equilibrium wage determination with matching and provides a bridge between some of the most prominent macro models and microeconometric research. The model incorporates productivity shocks, long-term contracts, on-the-job search and counter-offers. Importantly, the model allows for the possibility of assortative matching between workers and jobs due to complementarities between worker and job characteristics. We use the model to estimate the potential gain from optimal regulation and we consider the potential gains and redistributive impacts from optimal unemployment insurance policy. Here optimal policy is defined as that which maximizes total output and home production, accounting for the various constraints that arise from search frictions. The model is estimated on the NLSY using the method of moments.

Suggested Citation

Lise, Jeremy and Meghir, Costas and Robin, Jean-Marc, Mismatch, Sorting and Wage Dynamics (January 2013). NBER Working Paper No. w18719, Available at SSRN: https://ssrn.com/abstract=2202656

Jeremy Lise (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
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Costas Meghir

Yale University ( email )

37 Hillhouse avenue
New Haven, CT CT 06511
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+12034323558 (Phone)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
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Institute for Fiscal Studies (IFS) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jean-Marc Robin

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA) ( email )

48 boulevard Jourdan
75014 Paris
France
+33 1 4313 6365 (Phone)
+33 1 4313 6362 (Fax)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

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15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

French National Institute for Agricultural Research (INRA)

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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