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Structural and frictional unemployment in an equilibrium search model with heterogeneous agents
Author(s) -
Koning Pierre,
Ridder Geert,
Van Den Berg Gerard J.
Publication year - 1995
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.3950100508
Subject(s) - unemployment , economics , productivity , wage , labour economics , sample (material) , unemployment rate , efficiency wage , wage rate , econometrics , macroeconomics , chemistry , chromatography
We specify and estimate an equilibrium search model with between‐market heterogeneity in the productivity levels. The model allows for two types of unemployment: unemployment due to search frictions and unemployment due to wage floors. Wage floors may exist, because of large unemployment benefits or a binding (mandatory) minimum wage. Using data on labour market histories for a sample of Dutch workers, we decompose the total unemployment rate in a structural and frictional unemployment rate. We also discuss the effect of changes in the minimum wage.