The effect of search frictions on wages

Gerard J. Van den Berg, Aico Van Vuuren*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)

9 Citations (Scopus)

Abstract

We aim to test whether the degree of informational search frictions in the labor market has a negative effect on wages. In a range of equilibrium search models of the labor market, this effect is predicted to be negative. Nevertheless, 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. 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, and to assess the quantitative relevance of frictions for wages.

Original languageEnglish
Pages (from-to)875-885
Number of pages11
JournalLabour Economics
Volume17
Issue number6
DOIs
Publication statusPublished - Dec 2010

Keywords

  • Heterogeneity
  • Job durations
  • Labor market imperfections
  • Productivity

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