COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1886 Mismatch, Sorting and Wage Dynamics Jeremy Lise, Costas Meghir and Jean-Marc Robin January 2013 We develop an empirical search-matching model which is suitable for
analyzing the wage, employment and welfare impact of regulation in a labor market with
heterogeneous workers and jobs. To achieve this we develop an equilibrium 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. |
