Wage Dispersion and Search Behavior

57 Pages Posted: 29 Nov 2015

See all articles by Robert E. Hall

Robert E. Hall

Hoover Institution and Department of Economics, Stanford University; National Bureau of Economic Research (NBER)

Andreas I. Mueller

University of Texas at Austin - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

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Abstract

We use a rich new body of data on the experiences of unemployed job-seekers to determine the sources of wage dispersion and to create a search model consistent with the acceptance decisions the job-seekers made. From the data and the model, we identify the distributions of four key variables: offered wages, offered non-wage job values, the value of the job-seeker's non-work alternative, and the job-seeker's personal productivity. We find that, conditional on personal productivity, the dispersion of offered wages is moderate, accounting for 21 percent of the total variation in observed offered wages, whereas the dispersion of the non-wage component of offered job values is substantially larger. We relate our findings to an influential recent paper by Hornstein, Krusell, and Violante who called attention to the tension between the fairly high dispersion of the values job-seekers assign to their job offers – which suggest a high value to sampling from multiple offers – and the fact that the job-seekers often accept the first offer they receive.

Keywords: wage dispersion, reservation wages, search frictions, unemployment

JEL Classification: J31, J32, J64

Suggested Citation

Hall, Robert E. and Mueller, Andreas I., Wage Dispersion and Search Behavior. IZA Discussion Paper No. 9527, Available at SSRN: https://ssrn.com/abstract=2696365

Robert E. Hall (Contact Author)

Hoover Institution and Department of Economics, Stanford University ( email )

Stanford, CA 94305-6010
United States
650-723-2215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
650-723-2215 (Phone)

Andreas I. Mueller

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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