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Quantifying the Contribution of Search to Wage Inequality †

Quantifying the Contribution of Search to Wage Inequality † 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. (JEL J24, J31, J64 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Macroeconomics American Economic Association

Quantifying the Contribution of Search to Wage Inequality †

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Publisher
American Economic Association
Copyright
Copyright © 2014 by the American Economic Association
Subject
Articles
ISSN
1945-7715
eISSN
1945-7715
DOI
10.1257/mac.6.1.134
Publisher site
See Article on Publisher Site

Abstract

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. (JEL J24, J31, J64 )

Journal

American Economic Journal: MacroeconomicsAmerican Economic Association

Published: Jan 1, 2014

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