Working Paper: CEPR ID: DP3861
Authors: Pieter Gautier; Coen N. Teulings
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.
Keywords: assignment; search; wages
JEL Codes: J21; J23; J30; J60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| search frictions (F12) | wages (J31) |
| search frictions (F12) | correlation between skill and job complexity (J24) |
| correlation between skill and job complexity (J24) | wages (J31) |
| search frictions (F12) | concavity of wages (J31) |
| concavity of wages (J31) | wage determination (J31) |