Tinbergen Institute Discussion Paper No. 03-026/3
36 Pages Posted: 9 Jun 2003
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: 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: https://ssrn.com/abstract=392035 or http://dx.doi.org/10.2139/ssrn.392035