gender wage gaps reconsidered a structural approach using matched employer employee data in this paper we study the extent to which wage differentials between men and women can be explained by differences in productivity disparities in friction patterns segregation and wage discrimination for this purpose we propose an equilibrium search model that features rent splitting on the job search and two sided heterogeneity in productivity the model is estimated using german matched employer employee data overall the results reveal that female workers are less productive and more mobile than males in addition female workers have on average slightly lower bargaining power than their male counterparts

a quantitative evaluation of payroll tax subsidies for low wage workers an equilibrium search approach abstract phelps phelps e 1994 low wage employment subsidies versus the welfare state american economic review 84 54 58 presented the case for a low wage subsidy policy since the mid 1990s france has experimented with this strategy this paper evaluates the effect of this policy on employment and also on output and welfare we construct an equilibrium search model incorporating wage posting and specific human capital investment where unemployment and the distribution of both wages and productivity are endogenous we estimate this model using french data numerical simulations show that the prevailing minimum wage allows a high production level to be reached by increasing training investment even though the optimal minimum wage is lower we show that payroll tax subsidies enhance welfare more than a reduction in the minimum wage when they are spread over a large range of wages in order to avoid specialization in low productivity jobs

a nonsmooth nonconvex model of optimal growth this paper analyzes the nature of economic dynamics in a one sector optimal growth model in which the technology is generally nonconvex nondifferentiable and discontinuous the model also allows for irreversible investment and unbounded growth we develop various tools to overcome the technical difficulties posed by the generality of the model we provide sufficient conditions for optimal paths to be bounded to converge to zero to be bounded away from zero and to grow unboundedly we also show that under certain conditions if the discount factor is close to 1 any optimal path from a given initial capital stock converges to a small neighborhood of the golden rule capital stock at which sustainable consumption is maximized if it is maximized at infinity then as the discount factor approaches 1 any optimal path either grows unboundedly or converges to an arbitrarily large capital stock

termination of dynamic contracts in an equilibrium labor market model i construct an equilibrium model of the labor market where workers and firms enter into dynamic contracts that can potentially last forever but are subject to optimal terminations upon a termination the firm hires a new worker and the worker who is terminated receives a termination contract from the firm and is then free to go back to the labor market to seek new employment opportunities and enter into new dynamic contracts the model permits only two types of equilibrium terminations that resemble respectively the two kinds of labor market separations that are typically observed in practice involuntary layos and voluntary retirements the model allows simultaneous determination of its equilibrium turnover unemployment and retirement as well as the expected utility of the new labor market entrants

the effects of immigration in frictional labor markets theory and empirical evidence from eu countries immigrants are new comers in a labor market as a consequence they lack of social networks and other country specific and not directly productive valuable assets affecting their relative bargaining position against employers we introduce this simple observation into a matching model of the labor market and show that immigrants increase employment prospects of competing natives to test the predictions of our model we exploit yearly vari ations between 1998 and 2004 in the share of immigrants within occupations of 12 european countries we identify the causal impact of immigrants on natives employment rate using an instrumental variable strategy based on historical settlement patterns across host countries and occupations by origin countries we find that natives employment rate increases in oc cupations and sectors receiving more immigrants moreover we highlight the heterogeneity of this impact across groups of immigrants and host countries along dimensions that affect immigrants natives relative reservation wages

credible threats in a wage bargaining model with on the job search abstract this note shows that in standard equilibrium search models with strategic wage bargaining and on the job search renegotiation does not require mutual consent if the worker needs a credible threat to trigger renegotiation wages are renegotiated less frequently than in the original model

sorting and the output loss due to search frictions we analyze a general search model with on the job search ojs and sorting of heterogeneous workers into heterogeneous jobs for given values of nonmarket time the relative efficiency of ojs and the amount of search frictions we derive a simple relationship between the unemployment rate mismatch and wage dispersion we estimate the latter two from standard micro data our methodology accounts for measurement error which is crucial to distinguish true from spurious mismatch and wage dispersion we find that without frictions output would be about 9 5 higher if firms can commit to pay wages as a function of match quality and 15 5 higher if they cannot noncommitment leads to a business stealing externality which causes a 5 5 drop in output

on the job search sticky prices and persistence abstract models of the monetary transmission mechanism often generate empirically implausible business fluctuations this paper analyzes the role of on the job search in the propagation of monetary shocks in a sticky price model with labor market search frictions such frictions induce long term employment relationships such that the real marginal cost is determined by real wages and the cost of an employment relationship on the job search opens up an extra channel of employment growth that dampens the response of these two components because real marginal cost rigidity induces small price adjustments on the job search gives rise to a strong propagation of monetary shocks that increases output persistence

optimal policy in og models in the present paper general stationary overlapping generations economies with many commodities in every period and many different consumers in every generation are considered a government maximizes an utilitarian social welfare function that is the sum of weighted averages of utilities for generations through fiscal policy i e monetary transfers and taxes both situations with and without time discounting are considered it is shown that if the discount factor is sufficiently close to one then the optimal policy stabilizes the economy i e the equilibrium path has the turnpike property moreover the fiscal policy is shown to be time consistent

on the job search and moral hazard we analyze the interaction between intertemporal incentive contracts and search frictions associated with on the job search in our model agency problems call for wage contracts with deferred compensation at the same time workers do on the job search deferred compensation improves workers incentives to exert effort but distorts their on the job search decisions we show that deferred compensation is less attractive when the value to the worker firm pair of on the job search is high moreover the interplay between search frictions and wage contracts creates feedback effects if firms in equilibrium use contracts with deferred compensation fewer firms with vacancies enter the on the job search market and this in turn reduces the distortions created by deferred compensation these feedback effects between the incentive contracts used and the activity level in the search markets can lead to multiple equilibria a low turnover equilibrium where firms use deferred compensation and a high turnover equilibrium where they do not furthermore the model predicts that firms are more likely to use deferred compensation when search frictions are high and when the gains from on the job search are small

price dispersion with directed search we model a market where identical buyers direct their search to identical capacity constrained sellers sellers cannot fully commit to the list price so strategic bargaining may determine the sale price we study search and pricing behavior in symmetric equilibrium sale prices exhibit equilibrium dispersion as they respond naturally to local demand conditions uncoordinated search decisions lead to equilibrium demand heterogeneity so sellers realizing large demand bargain prices up we characterize the sale price distribution parametrically studying how different commitment limitations and market features affect pricing and surplus shares we also determine endogenously

temporary transfers in a simple dynamic general equilibrium model abstract the main result of this paper is to demonstrate that if future discounting is sufficiently weak a temporary transfer of commodities has almost no effects on current economies although it is well known in the macroeconomic literature this proposition has not been given any rigorous proof that takes the dynamic general equilibrium effect of a transfer into account this study builds a simple dynamic general equilibrium model with two goods and demonstrates that the proposition can be derived from the equilibrium conditions of perfect foresight equilibrium

competitive equilibria on turnpikes in a mckenzie economy i a neighborhood turnpike theorem in his seminal paper bewley 1982 integrates growth theory and competitive equilibrium theory considering a model with finitely many infinitely lived consumers who trade commodities in infinitely many competitive markets from the present through the future in such a model a competitive equilibrium path is an optimal growth path using this property he proves a turnpike theorem for competitive equilibrium paths in growth theory a social welfare function with respect to which optimal growth paths are considered has been assumed to be exogenously given bewley shows that in the competitive market system the market mechanism endogenously determines the social welfare function with respect to which an equilibrium path is regarded as an optimal path in bewley s model the future is discounted by a factor p in growth theory two types of turnpike theorems have been proved when the future is discounted the first type is called a neighborhood turnpike theorem it asserts that given c 0 there is 0 p 1 such that p p 1 implies that an optimal path at the discount factor p eventually stays within the s neighborhood of a stationary path this theorem does not require the social welfare function to be differentiable but only to be strictly concave and is proved by mckenzie 1979 the second type is called an asymptotic turnpike theorem it asserts that there is 0 p 1 such that p p 1 implies that an optimal path at the dicount factor p converges to a stationary path this theorem has been proved only under differentiability assumptions scheinkman 1976 bewley proves an asymptotic turnpike theorem making use of extensive differentiability assumptions the purpose of this paper is to synthesize these two importnat results of bewley and mckenzie namely we will prove a neighborhood turnpike theorem of mckenzie type in a model like that of bewley making no differentiability assumptions we will make a few generalizations of bewley s assumptions among them of importance are relaxing his differentiability assumptions weakening his interiority assumption and replacing his assumption of decreasing returns to

is gnp energy model logical abstract this research indicates that it is illogical to use gross national products gnp as an economic variable in the economic output energy model as the index of gnp has not been used in japan since the financial year of 2001 the argument over whether gross domestic products gdp or gnp is the correct variable to use in the economic output energy model should be stopped automatically

equilibrium turnpike theory with time separable utility abstract the purpose of this paper is to show that under reasonably general conditions intertemporal competitive equilibrium has a turnpike property the model is general because it permits 1 time variant time separable utility functions 2 heterogeneous rates of discount across consumers and 3 matching flatness in utilities and production possibilities the results rely on bounded marginal utility for all consumers and aggregate stationarity of utilities of the set of most patient consumers under these assumptions the neighborhood turnpike result holds with 1 and 2 because of the eventual unimportance of the impatient consumer matching flatness requires the use of a two sided liapounov function and the growth theoretic methods of mckenzie

learning your comparative advantages we introduce an equilibrium labor market model where workers gradually learn about their unobserved production abilities while engaged in a productive activity occupation workers observe their output and extract information that allows them to make inferences about their unobserved aptitudes because workers are learning about themselves their output informs them not only about their productivity in their current occupation but about their likely productivity in other occupations as well as workers acquire more information they self select into the occupations in which they expect to perform best and their wages increase returns to experience here capture improved job selection by workers as they sort through occupations and learn

a multiple objective model to deal with economy energy environment interactions abstract an economy energy environment multiple objective model based on the linear structure of inter industry production linkages is presented axes of evaluation consistent with sustainable energy strategies economic growth social welfare and environmental friendliness are explicitly considered the aim of this study is to provide decision makers with a comprehensive model which allows to assess environmental burdens global warming potential and acidification potential with respect to changes in economic activities consistent with distinct policy measures

identifying strategies for mitigating the global warming impact of the eu 25 economy using a multi objective input output approach global warming mitigation has recently become a priority worldwide a large body of literature dealing with energy related problems has focused on reducing greenhouse gases emissions at an engineering scale in contrast the minimization of climate change at a wider macroeconomic level has so far received much less attention we investigate here how to mitigate global warming by performing changes in an economy to this end we make use of a systematic tool that combines three methods linear programming environmentally extended input output models and life cycle assessment principles the problem of identifying key economic sectors that contribute significantly to global warming is posed in mathematical terms as a bi criteria linear program that seeks to optimize simultaneously the total economic output and the total life cycle co2 emissions we have applied this approach to the european union economy finding that significant reductions in global warming potential can be attained by regulating specific economic sectors our tool is intended to aid policy makers in the design of more effective public policies for achieving the environmental and economic targets sought

unhealthy insurance markets search frictions and the cost and quality of health insurance we analyze the effect of search frictions in the market for commercial health insurance frictions increase insurance premiums enough to transfer 13 2 percent of consumer surplus from fully insured employer groups to insurers approximately 34 4 billion in 1997 and increase insurance turnover by 64 percent for the average pol icy this rent transfer harms consumers and when combined with heightened turnover reduces incentives to invest in future health we also find that a publicly financed insurance option can improve the efficiency of private insurance markets by reducing search fric tion induced distortions in pricing and marketing efforts jel d83 g22 i18 in the united states health insurance for those under age 65 is typically provided through group plans purchased by employers from commercial insurers health insurance is a complex multi attribute service so employers looking to buy insur ance face a difficult shopping problem savvy purchasers must consider which of the many drugs their employees might use are in the insurer s formularies which local physicians are part of the insurer s provider network and what copays fees and deductibles apply to which pharmaceuticals providers and services comparison shopping is made even more difficult by the fact that many aspects of insurance involve commitments to provide services under hard to anticipate contingencies medical underwriting by insurers and the great profusion of insurance products raises administrative costs and increases the complexity of an employer group s

changing industrial structure to reduce carbon dioxide emissions a chinese application abstract increasing concern about carbon dioxide co2 emission reduction demands knowledge about the production structure of an economy information on productive linkages yields insight about forward and backward emission effects associated with sectoral inputs and outputs and serves as an essential starting point to identify the optimised industrial structure under the constraint of co2 emission this paper proposes a combined linkage analysis and multi objective programming approach to identify the key co2 emission sectors and the optimised production structure with respect to emission reduction target as a demonstration the proposed approach is applied to data from china in 2007 the result shows that to reduce co2 emissions from 5707 16 to 5452 12 million tonnes china needs to change its industrial structure by focussing on industrial groups as defined by linkage characteristics which would lead to a subsequent gdp decrease of 82 59 billion yuan from a policy standpoint the analytical techniques described in this paper can provide valuable information for planners and decision makers to formulate feasible and practical industrial polices with implications for co2 emissions

use of multicriteria decision analysis methods for energy planning problems most decision making requires the consideration of several conflicting objectives the term multiple criteria decision analysis mcda describes various methods developed for aiding decision makers in reaching better decisions energy planning problems are complex problems with multiple decision makers and multiple criteria therefore these problems are quite suited to the use of mcda a multitude of mcda methods exists these methods can be divided in three main groups value measurement models goal aspiration and reference level models and outranking models methods from all of these groups have been applied to energy planning problems particularly in the evaluation of alternative electricity supply strategies each of the methods has its advantages and drawbacks however we cannot conclude that one method generally is better suited than the others for energy planning problems a good alternative might be to apply more than one method either in combination to make use of the strengths of both methods or in parallel to get a broader decision basis for the decision maker until now studies of mcda in energy planning have most often considered energy networks with only one energy carrier more advanced energy systems with multiple energy carriers have been neglected even though this field ought to be suitable for use of mcda due to its high complexity many decision makers and many conflicting criteria

wage tenure contracts in a frictional labour market firms strategies for recruitment and retention a common assumption in equilibrium search and matching models of the labour market is that each firm posts a wage to be paid to any worker hired this paper considers the implications of firms posting contracts in a random matching model with on the job search more complex contracts enable firms to address both recruitment and retention problems by for example increasing the wage with tenure the effect on the labour market is to reduce turnover below the level required for efficient matching of workers to firms copyright 2004 wiley blackwell

a goal programming model for environmental policy analysis application to spain abstract sustainable development has become an important part of international and national approaches to integrate economic environmental social and ethical considerations so that a good quality of life can be enjoyed by current and future generations for as long as possible however nowadays sustainable development is threatened by industrial pollution emissions which cause serious environmental problems due to a lack of adequate quantitative models for environmental policy analysis there is a strong need for analytical models in order to know the effects of environmental policies in the present paper a goal programming model based on an environmental input output linear programming model is developed and applied to the spanish economy the model combines relations between economic energy social and environmental effects providing valuable information for policy makers in order to define and examine the different goals that must be implemented to reach sustainability

on the job search mismatch and efficiency this paper characterizes the equilibrium for a large class of search models with two sided heterogeneity and on the job search besides the well known congestion externalities we show that on the job search in combination with monopsonistic wage setting without commitment creates a business stealing externality in the absence of congestion effects this leads to excessive vacancy creation under wage setting with commitment this externality is absent because when posting a wage firms take into account the expected productivity of future workers in their current jobs if firms are able to make and respond to counteroffers then they will not have to pay no quit premia and this also leads to excessive vacancy creation

convergence of equilibria in an intertemporal general equilibrium model a dynamical system approach abstract in this paper we show that searching pareto optima in an intertemporal equilibrium model is equivalent to solving a family of mckenzie models defined by a vector of the unit simplex we use negishi s method to prove the existence of equilibria we then extend scheinkman s method to demonstrate that when the discount factor of the utility functions is sufficiently near one every equilibrium trajectory converges to a steady state

on the job search and cyclical unemployment crowding out vs vacancy effects incorporating on the job search otjs into a real business cycle model has been shown to increase the cyclical volatility of unemployment using a particularly simple model of otjs we show that the increased search of employed workers during expansions induces firms to open more vacancies but also crowds out unemployed workers in the job search resulting in an ambiguous overall effect on unemployment volatility we show analytically and numerically that the difference between the employer s share of the match surplus with an employed versus an unemployed job seeker determines the degree to which otjs increases unemployment volatility we use this result to re consider some related papers of otjs and explain the amplification of volatility they obtain finally we show that a plausible calibration of the otjs model allows us to reproduce most significant features of the us labor data

estimating incentive and welfare effects of nonstationary unemployment benefits the distribution of unemployment duration in our equilibrium matching model with spell dependent unemployment benefits displays time varying exit rates building on semi markov processes we translate these rates into an expression for the aggregate unemployment rate structural estimation using german microdata allows us to discuss the effects of an unemployment benefit reform hartz iv the reform reduced unemployment by less than 0 1 percentage points contrary to general beliefs the net wage for most skill and regional groups increased taking the insurance effect of unemployment benefits into account however the reform is welfare reducing for 76 of workers

asymptotic properties of a leontief economy abstract in this paper we discuss the asymptotic properties of equilibrium quantities of a leontief economy when agents have additively separable utilities we estimate the rate of growth of equilibrium quantities and prices that either tend to zero or infinity or remain bounded below and above by strictly positive vectors in the case of homogeneous preferences we prove that the quantities of any equilibrium converge to those of an equilibrium that grows at a constant rate

the economic impacts of river rehabilitation a regional input output analysis abstract we developed a model to predict the impacts of river rehabilitation activities on the local economy the model is based on the input output analysis technique and was applied to the planned rehabilitation project for the river thur in northern switzerland along the 4 km stretch between the communities of burglen and weinfelden we estimated changes in local employment and local economic output resulting from government spending on rehabilitation associated changes in adjacent land use and increased recreational activity accounting for land use changes required a modification of the conventional input output analysis technique which should be of general interest we accounted for uncertainty in the data and in some of the model assumptions by using a probabilistic formulation and propagating uncertainty through the model equations as time consuming local surveys were beyond the scope of this study we used the location quotient non survey technique to construct the local technical coefficients from national data and local employment data this implies that the model can be applied quite easily to a different study area in switzerland as long as local employment data are available for each chf 1 million expenditure per year on rehabilitation activities in our study region we estimate an extra 8 fulltime employment equivalents standard deviation 0 4 fte and an increased output of chf 1 4 million chf 0 05 million the low uncertainty of these estimates can be partly attributed to the structure of input output analysis and partly to the fact that we estimated changes in the economic output rather than output itself in addition to the above impacts we estimate that increased recreational use of the area will increase output by as much as chf 0 17 million chf 0 12 million and employment by as much as 1 7 fulltime employment equivalents 1 3 fte depending on the specific rehabilitation option selected

crime and the labor market a search model with optimal contracts abstract this paper extends the pissarides pissarides christopher a equilibrium unemployment theory cambridge mit 2000 model of the labor market to include crime and punishment a la becker becker gary s crime and punishment an economic approach journal of political economy 76 1968 169 217 all workers irrespective of their labor force status can commit crimes and the employment contract is determined optimally the model is used to study analytically and quantitatively the effects of various labor market and crime policies for instance a more generous unemployment insurance system reduces the crime rate of the unemployed but its effect on the crime rate of the employed depends on job duration and jail sentences when the model is calibrated to u s data the overall effect is to decrease crime but is quantitatively small small wage subsidies reduce unemployment and crime rates of employed and unemployed workers and raise society s welfare hiring subsidies reduce unemployment but they can raise the crime rate of employed workers crime policies police technology and jail sentences affect crime rates significantly but have only negligible effects on the labor market

worker flows job flows and unemployment in a matching model abstract standard matching models of unemployment generate far too little volatility in unemployment and vacancies relative to the variation in the shock variables shimer 2005 showed that in us data the vacancy to unemployment ratio is about 26 times more volatile than the standard model predicts he identified the flexibility of wages as the key issue and triggered a heated debate on possible improvements of the core model to accommodate these empirical facts in this paper we first document shimer s facts for the uk and find them to be qualitatively similar to us facts we then develop and calibrate a model based on the mortensen and pissarides approach that increases the volatility of the v u ratio 20 fold compared to the standard framework the key features of our model relate to the job creation decision by firms and the search options of workers we allow these to search whilst employed and firms to re advertise jobs that have been quit from this leads us to use a different job creation process whereby potential vacancies or job ideas arise at a finite rate per period over a range of idiosyncratic productivities calibrating the model to uk data we show that it delivers volatility in unemployment and vacancies much closer to though still not as large as that observed for the uk whilst retaining the standard wage determination process

on the job search and strategic bargaining abstract this paper studies wage bargaining in a simple economy in which both employed and unemployed workers search for better jobs the axiomatic nash bargaining solution and standard strategic bargaining solutions are inapplicable because the set of feasible payoffs is nonconvex i instead develop a strategic model of wage bargaining between a single worker and firm that is applicable to such an environment i show that if workers and firms are homogeneous there are market equilibria with a continuous wage distribution in which identical firms bargain to different wages each of which is a subgame perfect equilibrium of the bargaining game if firms are heterogeneous i characterize market equilibria in which more productive firms pay higher wages i compare the quantitative predictions of this model with burdett and mortensen s 1998 wage differentials employer size and unemployment international economic review 39 257 273 wage posting model and argue that the bargaining model is theoretically more appealing along important dimensions

productivity growth on the job search and unemployment abstract the impact of long run productivity growth on unemployment is studied we incorporate disembodied technological progress and on the job search into the endogenous job separation model of mortensen and pissarides 1994 because we include on the job search faster growth reduces unemployment by decreasing job separation and inducing job creation the incorporation of on the job search substantially improves the ability of the mortensen and pissarides model to explain the effect of growth on labor market variables specifically our model generates not only an empirically consistent sign of the effect but also a larger impact of growth on unemployment than the standard matching model

identification of search models using record statistics this paper shows how record value theory a branch of statistics that deals with the timing and magnitude of extreme values in sequences of random variables can be used to recover features of the wage offer distribution in conventional search models using national longitudinal survey of youth nlsy wage data i show that the data are not compatible with specifications for the offer distribution characterized by extreme negative skewness in addition i show that my approach can be used to construct a bound on the returns to job seniority my results suggest that job seniority plays only a minor role in the wage growth of the workers surveyed in the nlsy copyright 2008 wiley blackwell

unemployment history and frictional wage dispersion abstract recent evidence shows that baseline search models struggle to match the observed levels of wage dispersion this paper studies a random matching search model with human capital losses during unemployment wage dispersion increases as workers accept lower wages to avoid long unemployment spells the model explains between a third and half of the observed residual wage dispersion when adding on the job search the model accounts for all of the residual wage dispersion and generates substantial dispersion even for high values of non market time the paper thus addresses the trade off between explaining frictional wage dispersion and the cyclical behavior of unemployment

equilibrium wage tenure contracts in this study we consider a labor market matching model where firms post wage tenure contracts and workers both employed and unemployed search for new job opportunities given workers are risk averse we establish there is a unique equilibrium in the environment considered although firms in the market make different offers in equilibrium all post a wage tenure contract that implies a worker s wage increases smoothly with tenure at the firm as firms make different offers there is job turnover as employed workers move jobs as the opportunity arises this implies the increase in a worker s wage can be due to job to job movements as well as wage tenure effects further there is a nondegenerate equilibrium distribution of initial wage offers that is differentiable on its support except for a mass point at the lowest initial wage we also show that relevant characteristics of the equilibrium can be written as explicit functions of preferences and the other market parameters

labor search and matching in macroeconomics abstract the labor search and matching model plays a growing role in macroeconomic analysis this paper provides a critical selective survey of the literature four fundamental questions are explored how are unemployment job vacancies and employment determined as equilibrium phenomena what determines worker flows and transition rates from one labor market state to another how are wages determined what role do labor market dynamics play in explaining business cycles and growth the survey describes the basic model reviews its theoretical extensions and discusses its empirical applications in macroeconomics the model has been developed against the background of difficulties with the use of the neo classical frictionless model of the labor market in macroeconomics its success includes the modelling of labor market outcomes as equilibrium phenomena the reasonable fit of the data and when inserted into business cycle models improved performance of more general macroeconomic models at the same time there is evidence against the nash solution used for wage setting and an active debate as to the ability of the model to account for some of the cyclical facts

large firms and within firm occupational reallocation abstract this paper considers the equilibrium interaction between within firm and across firm reallocation in the presence of labor market frictions while a sizable literature has investigated frictional labor markets it has ignored within firm mobility nonetheless every year a sizable fraction of workers switch occupations without changing firms employees in large firms can sample from a larger selection and across firm mobility is replaced by within firm mobility bringing together within and across firm reallocation along with labor market frictions naturally accounts for the observed differences in worker flows and wages across firms of different sizes

wage differentials employer size and unemployment the unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed the unique nondegenerate equilibrium distribution of wage offers is constructed for three cases 1 identical workers and employers 2 identical employers and an atomless distribution of worker supply prices and 3 identical workers and an atomless distribution of job productivities copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

on the job search productivity shocks and the individual earnings process individual labor earnings observed in worker panel data have complex highly persistent dynamics we investigate the capacity of a structural job search model with i i d productivity shocks to replicate salient properties of these dynamics such as the covariance structure of earnings the evolution of individual earnings mean and variance with the duration of uninterrupted employment or the distribution of year to year earnings changes specifically we show within an otherwise standard job search model how the combined assumptions of on the job search and wage renegotiation by mutual consent act as a quantitatively plausible internal propagation mechanism of i i d productivity shocks into persistent wage shocks the model suggests that wage dynamics should be thought of as the outcome of a specific acceptance rejection scheme of i i d productivity shocks this offers an alternative to the conventional linear arma type approach to modelling earnings dynamics structural estimation of our model on a 12 year panel of highly educated british workers shows that our simple framework produces a dynamic earnings structure which is remarkably consistent with the data