Job turnover rates and residual wage dispersion

Argentina experienced an important increase in wage dispersion in the last 20 years. This increase occurred not only across different education groups, but also within these groups. In spite of exceptional economic growth rates, after the 2001/2002 macroeconomic crisis, residual inequality remained high. This paper applies a search model with exogenous human capital accumulation to Argentinean data to investigate the role of high job turnover rates in accounting for the residual inequality’s increase occurred since the onset of the crisis. I find that the contemporaneous increase in the job separation rate can account quite precisely for the observed increase in residual inequality. This highlights one aspect of the social costs associated with the crisis and not considered yet in the literature: a widening of the earnings distribution.