Discussion Paper Details

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Title: How Large are Search Frictions?

Author(s): Pieter A. Gautier and Coen N Teulings

Publication Date: April 2003

Keyword(s): assignment, search and wages

Programme Area(s): Labour Economics

Abstract: This Paper presents strong evidence for the concavity of wages in job and worker characteristics by adding second order terms to a Mincerian earnings function for six OECD countries. Under a standard normality assumption, this concavity cannot be attributed to unobserved components in those characteristics. An assignment model with search frictions provides a parsimonious explanation for our findings. This model yields two restrictions on the coefficients, which fit the data very well. The impact of search frictions on wages is large. Our results relate to the literature on industry wage differentials, on structural identification in hedonic models, and on wage posting versus Nash bargaining in search models.

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Bibliographic Reference

Gautier, P and Teulings, C. 2003. 'How Large are Search Frictions?'. London, Centre for Economic Policy Research.