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RESIDUAL WAGE DISPARITY AND COORDINATION UNEMPLOYMENT *
Author(s) -
Julien Benoit,
Kennes John,
King Ian
Publication year - 2006
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2006.00402.x
Subject(s) - wage dispersion , residual , unemployment , wage , economics , dispersion (optics) , productivity , baseline (sea) , labour economics , econometrics , exploit , structural estimation , distribution (mathematics) , duration (music) , efficiency wage , macroeconomics , computer science , mathematics , art , mathematical analysis , oceanography , computer security , literature , algorithm , optics , geology , physics
How much of residual wage dispersion can be explained by an absence of coordination among firms? To answer, we construct a dynamic directed search model with identical workers where firms can create high‐ or low‐productivity jobs and are uncoordinated in their offers to workers, calibrated to the U.S. economy. Workers can exploit ex post opportunities once approached by firms, and can conduct on‐the‐job search. The stationary equilibrium wage distribution is hump‐shaped, skewed significantly to the right, and, with baseline parameters, generates residual dispersion statistics 75–90% of those found empirically. However, the model underestimates the average duration of unemployment.