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We develop an empirical search-matching model which is suitable for analysing the wage, employment and welfare impact of regulation in a labour market with heterogeneous workers and jobs. To achieve this we develop an equilirium model of wage determination and employment which extends the current literature on equilibrium wage determination with matching and provides a bridge between some of the most prominent macro models and microeconometric research. The model incorporates productivity shocks, long-term contracts, on-the-job search and counter-offers. Importantly, the model allows for the possibility of assortative matching between workers and jobs due to complementarities between worker and job characteristics. We use the model to estimate the potential gain from optimal regulation and we consider the potential gains and redistributive impacts from optimal unemployment insurance policy. The model is estimated on the NLSY using the method of moments.
Authors
Research Fellow Yale University
Costas is a Research Fellow of the IFS and a Professor of Economics at Yale University and a Visiting Professor at University College London.
Research Fellow Sciences Po and University College London
Jean-Marc is a Research Fellow of the IFS and a Professor of Economics at Sciences Po, Paris, and University College London.
Research Associate University of Minnesota
Jeremy is an International Research Associate at the IFS and an Associate Professor of Economics at the University of Minnesota.
Working Paper details
- DOI
- 10.1920/wp.ifs.2013.1316
- Publisher
- Institute for Fiscal Studies
Suggested citation
J, Lise and C, Meghir and J, Robin. (2013). Mismatch, sorting and wage dynamics. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/mismatch-sorting-and-wage-dynamics (accessed: 3 May 2024).
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