Labor Market Search and Schooling Investment

40 Pages Posted: 29 Apr 2015

See all articles by Christopher J. Flinn

Christopher J. Flinn

New York University -Leonard N. Stern School of Business - Department of Economics; IZA Institute of Labor Economics

Joseph Mullins

University of Western Ontario - Department of Economics

Date Written: May 2015

Abstract

We generalize a search, matching, and bargaining model to allow individuals to acquire productivity‚Äźenhancing schooling prior to labor market entry. In general, search frictions and weakness in bargaining position contribute to underinvestment in schooling from an efficiency perspective. Using estimates of a general equilibrium version of the model in which firm vacancy creation decisions are included, we find that minimum wages and schooling subsidies improve aggregate welfare, but have very different welfare impacts across the ability distribution. In particular, policies that maximize the average welfare of workers have strongly negative effects on the welfare of the least able.

Suggested Citation

Flinn, Christopher J. and Mullins, Joseph, Labor Market Search and Schooling Investment (May 2015). International Economic Review, Vol. 56, Issue 2, pp. 359-398, 2015, Available at SSRN: https://ssrn.com/abstract=2600297 or http://dx.doi.org/10.1111/iere.12108

Christopher J. Flinn (Contact Author)

New York University -Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

IZA Institute of Labor Economics

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

Joseph Mullins

University of Western Ontario - Department of Economics ( email )

Social Science Centre, Room 4071
London, Ontario N6A 5C2
Canada

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