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How Large are Search Frictions?

Tinbergen Institute Discussion Paper No. 03-026/3

36 Pages Posted: 9 Jun 2003  

Pieter A. Gautier

Free University of Amsterdam; Tinbergen Institute Amsterdam (TIA); IZA Institute of Labor Economics

Coen N. Teulings

University of Amsterdam; University of Cambridge

Multiple version iconThere are 2 versions of this paper

Date Written: March 12, 2003


This paper presents strong evidence for the concavity of wages in job and worker characteristics by adding second order terms to a Mincerian earnings function for 6 OECD countries. Under a standard normality assumption, this concavity cannot be attributed to unobserved components in those characteristics. An assignment model with search frictions provides a parsimonious explanation for our findings. This model yields two restrictions on the coefficients which fit the data very well. The impact of search frictions on wages is large. Our results relate to the literature on industry wage differentials, on structural identification in hedonic models, and on wage posting versus Nash bargaining in search models.

Keywords: wages, search, assignment

JEL Classification: J210, J300, J600, J230

Suggested Citation

Gautier, Pieter A. and Teulings, Coen N., How Large are Search Frictions? (March 12, 2003). Tinbergen Institute Discussion Paper No. 03-026/3. Available at SSRN: or

Pieter A. Gautier (Contact Author)

Free University of Amsterdam ( email )

Amsterdam, ND North Holland

Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

Coen N. Teulings

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

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