Working Paper: NBER ID: w27758
Authors: Paolo Martellini; Guido Menzio
Abstract: Declining search frictions generate productivity growth by allowing workers to find jobs for which they are better suited. The return of declining search frictions on productivity varies across different types of workers. For workers who are “jacks of all trades”—in the sense that their productivity is nearly independent from the distance between their skills and the requirements of their job’ declining search frictions lead to minimal productivity growth. For workers who are “masters of one trade”—in the sense that their productivity is very sensitive to the gap between their individual skills and the requirements of their job—declining search frictions lead to fast productivity growth. As predicted by this view, we find that workers in routine occupations have low wage dispersion and growth, while workers in non-routine occupations have high wage dispersion and growth.
Keywords: search frictions; labor productivity; wage growth; wage dispersion; occupational inequality
JEL Codes: E24; J24; J31; J64; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Declining search frictions (D83) | Improved labor allocation (J29) |
| Improved labor allocation (J29) | Increased average productivity (O49) |
| Declining search frictions (D83) | Increased average productivity (O49) |
| Declining search frictions (D83) | Higher productivity growth for specialized workers (O49) |
| Skill distance (J24) | Elasticity of productivity (D24) |
| Wage dispersion in occupations (J31) | Greater wage growth (J31) |
| Differential returns to declining search frictions (J69) | Growth differential between routine and non-routine occupations (J69) |
| Declining search frictions (D83) | Rising wage inequality (J31) |
| Routine workers (J29) | Slower wage growth (J39) |