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Publication - Professor Gerard Van den Berg

    The effect of search frictions on wages


    Van den Berg, GJ & Van Vuuren, A, 2010, ‘The effect of search frictions on wages’. Labour Economics, vol 17., pp. 875-885


    We aim to test whether the degree of informational search frictions in the labor market has a negative effect on wages. In a range of equilibrium search models of the labor market, this effect is predicted to be negative. Nevertheless, this has never been tested. We perform tests with matched worker-firm data. The worker data are informative on individual wages and labor market transitions, and this allows for estimation of the degree of search frictions. The firm data are informative on labor productivity. This allows us to investigate how the mean difference between labor productivity and wages in a market depends on the degree of frictions and other determinants, and to assess the quantitative relevance of frictions for wages.

    Full details in the University publications repository