Quantifying the contribution of search to wage inequality Articles uri icon

publication date

  • January 2014

start page

  • 134

end page

  • 161

issue

  • 1

volume

  • 6

International Standard Serial Number (ISSN)

  • 1945-7707

Electronic International Standard Serial Number (EISSN)

  • 1945-7715

abstract

  • We empirically establish that one-third of job transitions leads to wagelosses. Using a quantitative on-the-job search model, we find that60 percent of them are movements down the job ladder. Accountingfor them, our baseline calibration matches the large residual wageinequality in US data while attributing only 13.7 percent of overallwage inequality to the presence of search frictions in the labormarket. We can trace the difference between ours and previous muchhigher estimates to our explicit modeling of nonvalue improvingjob-to-job transitions