http://repub.eur.nl/res/aut/1879/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/19383/ 2010-05-01T00:00:00Z We show how initial wealth differences between low-skilled minorities and white workers can generate differences in their labor-market outcomes. This even occurs in the absence of a taste for discrimination against ethnic minorities or exogenous differences in distance to jobs. Because of the initial wealth difference, minorities cannot afford to buy a car while whites can. Car ownership allows whites to reach more jobs per unit of time, which gives them a better bargaining position in the labor market. As a result, in equilibrium, ethnic minorities end up with both higher unemployment rates and lower wages than whites. Furthermore, we also show that it takes more time for minorities to reach their jobs even though they travel less miles when employed. Those predictions are consistent with the data. Better access to capital markets or better public transportation will reduce the differences in labor-market outcomes. http://repub.eur.nl/res/pub/6599/ 2005-02-02T00:00:00Z Do people move to cities because of marriage market considerations? In cities singles can meet more potential partners than in rural areas. Singles are therefore prepared to pay a premium in terms of higher housing prices. Once married, the marriage market benefits disappear while the housing premium remains. We extend the model of Burdett and Coles (1997) with a distinction between efficient (cities) and less efficient (non-cities) search markets. One implication of the model is that singles are more likely to move from rural areas to cities while married couples are more likely to make the reverse movement. A second prediction of the model is that attractive singles benefit most from a dense market (i.e. from being choosy). Those predictions are tested with a unique Danish dataset. http://repub.eur.nl/res/pub/6640/ 2004-06-01T00:00:00Z We examine wage competition in a model where identical workers choose the number of jobs to apply for and identical firms simultaneously post a wage. The Nash equilibrium of this game exhibits the following properties: (i) an equilibrium where workers apply for just one job exhibits unemployment and absence of wage dispersion; (ii) an equilibrium where workers apply for two or for more (but not for all) jobs always exhibits wage dispersion and, typically, unemployment; (iii) the equilibrium wage distribution with a higher vacancy-to-unemployment ratio first-order stochastically dominates the wage distribution with a lower level of labor market tightness; (iv) the average wage is non-monotonic in the number of applications; (v) the equilibrium number of applications is non-monotonic in the vacancy-to-unemployment ratio; (vi) a minimum wage increase can be welfare improving because it compresses the wage distribution and reduces the congestion effects cause! d by the socially excessive number of applications; and (vii) the only way to obtain efficiency is to impose a mandatory wage that eliminates wage dispersion altogether. http://repub.eur.nl/res/pub/11213/ 2004-04-01T00:00:00Z This paper describes a search model with a continuum of worker and job types, free entry and transferable utility. We apply a second-order Taylor expansion to characterize the equilibrium, derive the “cost of search” and show that it is decreasing in the substitutability of worker types. This cost of search is then decomposed into three components: unemployment, vacancy costs and mismatch. Our contact technology rules out congestion effects between different worker types and therefore exhibits increasing returns to scale. One third of those increasing returns in contacts are shown to be absorbed by firms and workers being more choosy. The resulting equilibrium is not efficient. Unemployment benefits can reduce the loss by serving as a search subsidy. Numerical simulations of the model show that our Taylor expansions are quite accurate. http://repub.eur.nl/res/pub/829/ 2003-09-04T00:00:00Z Most empirical studies on the minimum wage find a spike at the minimum wage, compression of wage differentials at a large interval above the minimum wage and small employment losses. This paper offers a search model which is consistent with these facts. We consider a continuum of worker and job types, Nash wage bargaining, and a production structure based on comparative advantages. The introduction of a minimum wage in this model makes some matches at the lower segments no longer profitable. In addition it leads to a redistribution of rents from firms to low skilled workers. A cluster of relatively simple vacancies, offering the minimum wage, is opened because the workers in this segment become relatively scarce. Finally, we give some numerical simulations to test for the validity of our approximations. http://repub.eur.nl/res/pub/6721/ 2003-01-12T00:00:00Z This paper presents strong evidence for the concavity of wages in job and worker characteristics by adding second order terms to a Mincerian earnings function for 6 OECD countries. Under a standard normality assumption, this concavity cannot be attributed to unobserved components in those characteristics. An assignment model with search frictions provides a parsimonious explanation for our findings. This model yields two restrictions on the coefficients which fit the data very well. The impact of search frictions on wages is large. Our results relate to the literature on industry wage differentials, on structural identification in hedonic models, and on wage posting versus Nash bargaining in search models. http://repub.eur.nl/res/pub/6788/ 2003-01-09T00:00:00Z We analyze a model of directed search in which unemployed job seekers observe all wage offers. We allow for the possibility of multiple applications by workers and ex post competition among vacancies. For any number of applications, there is a unique symmetric equilibrium in which vacancies post a common wage. When workers apply to only one vacancy, a single wage is paid and the resulting equilibrium is efficient. When workers make multiple applications, there is dispersion in wages paid, and equilibrium may be inefficient. We show that our results also hold in a steady-state version of the model. http://repub.eur.nl/res/pub/6806/ 2002-06-14T00:00:00Z Can increasing returns to scale in search explain regional differentiation between cities and rural areas? To answer this question, we develop a model of an economy that consists of several regions. Within each region, jobs and workers are heterogeneous by respectively skill and job complexity type. Because of the search frictions, firms and workers in each region must trade-off a better expected match quality against a longer period of non-production. Labor mobility between regions induces the equalization of reservation wages for each skin type and interregional trade of end products yields regional specialization in production. The model predicts that high density areas make use of their scale advantage by producing end products with a high dispersion of skin requirements. Empirical evidence for the United States corroborates the implications of the model. http://repub.eur.nl/res/pub/6846/ 2001-08-27T00:00:00Z We analyze the implications of multiple applications by job seekers for the micro-foundations of the aggregate matching function. We emphasize a coordination failure caused by multiple applications that has not been previously considered, namely, that firms can waste time and effort processing an applicant who is ultimately hired by another firm. http://repub.eur.nl/res/pub/7689/ 2000-05-01T00:00:00Z This paper describes a search model with a continuum of worker and job types, transferable utility and an IRS contact technology. We apply a second order Taylor expansion to approximate an analytical solution of the equilibrium. We find that one third of the increasing returns in contacts are absorbed by firms and workers being more choosy. Hence, strongly increasing returns in contact rates are consistent with weakly increasing returns in matching. In addition, we derive and decompose the efficiency loss due to inadequate incentives and show how unemployment benefits can reduce the loss. Finally, we derive a relation between the size of the surplus due to search frictions and the degree of substitutability of worker types at given job complexity levels. Numerical simulations of the model show that our approximations are quite accurate. http://repub.eur.nl/res/pub/7690/ 2000-04-12T00:00:00Z In this paper we derive a structural measure for labor market density based on the Ellison and Glasear (1997) index for industry concentration''. This labor market density measure serves as a proxy for the number of workers that can reach a certain work area within a reasonal amount of traveling time. We apply this measure to a standard wage equation and find that it takes account of almost half of the cross region wage variance (not explained by other observables). Moreover, it explains substantiallly more than the traditional density measure: people per square mile.