This paper demonstrates that the standard search and matching models of equilibrium unemployment, once properly calibrated, can generate only a tiny amount of frictional wage dispersion, i.e., wage differentials among ex-ante similar workers induced purely by search frictions. The analysis is centered around a specific measure of wage dispersion— the ratio between the average wage and the lowes...

We demonstrate that wage volatility, measured as the cross-sectional variance of wage changes in PSID data, is counter-cyclical. We quantify this relationship by estimating the regression coefficient of wage volatility on the national unemployment rate in a multilevel Bayesian model, then decompose this coefficient into three main factors. During a recession, wage volatility increases substanti...

Standard search and matching models of equilibrium unemployment, once properly calibrated, can generate only a small amount of frictional wage dispersion, i.e., wage differentials among ex-ante similar workers induced purely by search frictions. We derive this result for a specific measure of wage dispersion—the ratio between the average wage and the lowest (reservation) wage paid. We show that...

Very Preliminary and Incomplete. In this paper, I present and estimate a flexible partial equilibrium on-the-job search model with the goal of better understanding wage dynamics. A very recent literature uses search models to understand the dynamics that govern the evolution of wages. This literature tries to solve the problem of lack of structural interpretation that affects univariate models ...

It is widely acknowledged that tax and transfer policies can a¤ect employment. This paper explores a di¤erent potential impact of transfer policy by asking whether subsidies also a¤ect job duration and wage growth. We provide an analytical framework that identi…es causal links between earnings subsidies, job turnover, and wage growth. This framework highlights the importance of the form of the ...

It is widely acknowledged that tax and transfer policies can a¤ect employment. This paper explores a di¤erent potential impact of transfer policy by asking whether subsidies also a¤ect job duration and wage growth. We provide an analytical framework that identi…es causal links between earnings subsidies, job turnover, and wage growth. This framework highlights the importance of the form of the ...