Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy
Gerard J. van den Berg
The effect of search frictions on wages
() and Aico van Vuuren
Abstract: Labour 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
labour 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; (follow links to similar papers)
JEL-Codes: J31; J41; J42; J60; (follow links to similar papers)
55 pages, June 17, 2003
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- This paper is published as:
van den Berg, Gerard J. and Aico van Vuuren, (2010), 'The effect of search frictions on wages', Labour Economics, Vol. 17, December, No. 6, pages 875-885
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