Search efficiency, wage dynamics and welfare

Avcioglu, S and Karabay, B 2019, 'Search efficiency, wage dynamics and welfare', Economic Modelling, pp. 1-17.

Document type: Journal Article
Collection: Journal Articles

Title Search efficiency, wage dynamics and welfare
Author(s) Avcioglu, S
Karabay, B
Year 2019
Journal name Economic Modelling
Start page 1
End page 17
Total pages 17
Publisher Elsevier BV
Abstract Advances in information technology have improved the job-search process in the labor market. We analyze the effects of this improvement by constructing a search-and-matching model with two sectors: a risky sector with firm-specific productivity shocks and a risk-free sector. The risky sector is characterized by a low level of commitment between employers and workers - either party can end the employment relationship. We show that a better job-search process generates more job matches in the risky sector, and this benefits workers by improving their outside options. The effect on employers is subtle: while it is easier to fill vacancies, workers become more expensive. At the same time, the ease of finding new workers makes it harder for employers to keep their wage promises to workers and increases wage volatility. Our paper contributes to the literature by offering a novel explanation for the observed rise in wage volatility.
Subject Labour Economics
Macroeconomics (incl. Monetary and Fiscal Theory)
Keyword(s) Search efficiency
Self-enforcing contracts
Wage volatility
DOI - identifier 10.1016/j.econmod.2019.02.016
Copyright notice © 2019 Elsevier B.V.
ISSN 0264-9993
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Created: Mon, 29 Apr 2019, 13:04:00 EST by Catalyst Administrator
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