The Effect of Search Frictions on Wages

64 Pages Posted: 24 Jul 2003

See all articles by Gerard J. van den Berg

Gerard J. van den Berg

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

Aico van Vuuren

Erasmus University Rotterdam (EUR) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2003

Abstract

Labor market theories allowing for search frictions make marked predictions on the effect of the degree of frictions on wages. Often, the effect is predicted to be negative. Despite the popularity of these theories, this has never been tested. We perform tests with matched worker-firm data. The worker data are informative on individual wages and labor market transitions, and this allows for estimation of the degree of search frictions. The firm data are informative on labor productivity. The matched data provide the skill composition in different markets. Together this allows us to investigate how the mean difference between labor productivity and wages in a market depends on the degree of frictions and other determinants. We correct for worker self-selection into high-wage jobs. Using within-market variation, we also investigate the extent of (and explanations for) positive assortative matching.

Keywords: Labor Market Imperfections, Job Durations, Productivity, Heterogeneity, Sorting, Assortative Matching

JEL Classification: J3, J6, J4, C5

Suggested Citation

van den Berg, Gerard J. and van Vuuren, Aico, The Effect of Search Frictions on Wages (June 2003). IZA Discussion Paper No. 805; Tinbergen Institute Working Paper 2006-077/3. Available at SSRN: https://ssrn.com/abstract=422543

Gerard J. Van den Berg (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6132 (Phone)
+32 20 444 6020 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Aico Van Vuuren

Erasmus University Rotterdam (EUR) - Department of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 4082158 (Phone)
+31 10 4089149 (Fax)

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