Quantifying the Contribution of Search to Wage Inequality
- (pp. 134-61)
Abstract
We empirically establish that one-third of job transitions leads to wage losses. Using a quantitative on-the-job search model, we find that 60 percent of them are movements down the job ladder. Accounting for them, our baseline calibration matches the large residual wage inequality in US data while attributing only 13.7 percent of overall wage inequality to the presence of search frictions in the labor market. We can trace the difference between ours and previous much higher estimates to our explicit modeling of nonvalue improving job-to-job transitions.Citation
Tjaden, Volker, and Felix Wellschmied. 2014. "Quantifying the Contribution of Search to Wage Inequality." American Economic Journal: Macroeconomics, 6 (1): 134-61. DOI: 10.1257/mac.6.1.134Additional Materials
JEL Classification
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J64 Unemployment: Models, Duration, Incidence, and Job Search
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