Estimating Measures of Labor Market Imperfection for Five OECD Countries, Using Aggregate Data in an Equilibrium Search Framework

In this paper we de ne and estimate measures of labor market imperfection in the context of an equilibrium search and matching framework. The method uses readily available aggregate data on marginal distributions of unemployment and job durations and wages. We estimate an index of search frictions, the magnitude of structural and frictional unemployment, and the average monopsony power of rms, and we examine the e ect of the minimum wage, unemployment bene ts and search frictions on monopsony power. Estimation of some of the characteristics is invariant to the way in which wage determination is modeled. We perform separate empirical analyses for the USA, the UK, France, Germany and the Netherlands. Johns Hopkins University and Free University Amsterdam Free University Amsterdam, Tinbergen Institute and CEPR. E-mail: [email protected]. Address: Department of Economics, Free University Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands.