European Business Schools Librarian's Group
Home About Series Subject/JEL codes Advanced Search
The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 1:
Skill or Luck? Search Frictions and Wage Differentials

Tore Ellingsen () and Åsa Rosen

Abstract: The paper seeks to explain a collection of empirical regularities concerning inter- and intra-industrial wage differentials. For example, the model is consistent with the following well established set of observations: (i) After correcting for other variables, the wage of displaced workers is strongly related both to the characteristics of the original firm and the characteristics of the new firm, (ii) wage differentials are correlated across occupations, and (iii) the pattern of wage differentials are similar across countries with different market institutions. Our framework is a search- matching model with heterogeneous worker skills and endogenous wage policies (wage posting or bargaining). The model has equilibria in which firms post different wages. Higher wages attract more able workers on average. For a given posted wage, there may be an interval of worker productivities such that both the worker and the firm are satisfied with the match. Hence, a worker's wage reflects luck as well as skill. Even though the model predicts a correlation between industry characteristics and wage premia, the relationship can not be exploited by policy makers (the Lucas critique applies).

Keywords: Wage differentials; recruiting; adverse selection; search models; (follow links to similar papers)

JEL-Codes: J31; J41; (follow links to similar papers)

28 pages, January 1994

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Downloadable files:

hastef0001.ps    PostScript file
hastef0001.ps.zip    PKZipped PostScript
hastef0001.pdf    PDF-file
hastef0001.pdf.zip    PDF-file (zipped)
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design Joakim Ekebom

Handle: RePEc:hhs:hastef:0001 This page was generated on 2017-03-26 21:39:46