TY - JOUR
T1 - Frictional wage dispersion in search models
T2 - A quantitative assessment
AU - Hornstein, Andreas
AU - Krusell, Per
AU - Violante, Giovanni L.
PY - 2011/12
Y1 - 2011/12
N2 - We propose a new measure of frictional wage dispersion: the meanmin wage ratio. For a large class of search models, we show that this measure is independent of the wage-offer distribution but depends on statistics of labor-market turnover and on preferences. Under plausible preference parameterizations, observed magnitudes for worker flows imply that in the basic search model, and in most of its extensions, frictional wage dispersion is very small. Notable exceptions are some of the most recent models of on-the-job search. Our new measure allows us to rationalize the diverse empirical findings in the large literature estimating structural search models.
AB - We propose a new measure of frictional wage dispersion: the meanmin wage ratio. For a large class of search models, we show that this measure is independent of the wage-offer distribution but depends on statistics of labor-market turnover and on preferences. Under plausible preference parameterizations, observed magnitudes for worker flows imply that in the basic search model, and in most of its extensions, frictional wage dispersion is very small. Notable exceptions are some of the most recent models of on-the-job search. Our new measure allows us to rationalize the diverse empirical findings in the large literature estimating structural search models.
UR - http://www.scopus.com/inward/record.url?scp=83755224692&partnerID=8YFLogxK
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U2 - 10.1257/aer.101.7.2873
DO - 10.1257/aer.101.7.2873
M3 - Article
AN - SCOPUS:83755224692
SN - 0002-8282
VL - 101
SP - 2873
EP - 2898
JO - American Economic Review
JF - American Economic Review
IS - 7
ER -