Structural models of wage and employment dynamics : [... papers presented at the Conference on Labor Market Models and Matched Employer-Employee Data held at Sandbjerg Manor in Sønderborg, Denmark, August 15-18, 2004

Structural Models of Wage and Employment Dynamics" contains selected papers from a conference held in honour of Professor Dale T. Mortensen upon the occasion of his 65th birthday. The papers are on some of Professor Dale T. Mortensen's current research topics: the development of equilibrium dynamic models designed to account for wage dispersion and the time series behaviour of job and worker flows. The conference is the sixth in a series. From the beginning there has been a close interplay among economic theorists, econometricians, and applied economists. This book also has a section with theoretical papers as well as sections with micro- and macro-econometric papers. These conferences have had significant influence on how we think about public policy in the labour market, and what kinds of data would be needed to answer questions about these policies. Contributions to Economic Analysis was established in 1952. The series purpose is to stimulate the international exchange of scientific information. The series includes books from all areas of macroeconomics and microeconomics Of Conference Papers / Dale T. Mortensen 3 -- Ii Theory Papers -- Chapter 1 Bargaining, On-the-job Search And Labor Market Equilibrium / Ken Burdett, Roberto Bonilla 15 -- 2 The Model 18 -- 2.1 Firms 19 -- 2.2 Workers 19 -- 3 Bargaining 22 -- 4 Market Equilibria 26 -- 4.1 Market Equilibrium With On-the-job Search 28 -- 4.2 Market Equilibrium With No On-the-job Search 30 -- Appendix Proof Of Proposition 5 34 -- Chapter 2 On-the-job Search And Strategic Bargaining / Robert Shimer 37 -- 2 Model 40 -- 2.1 Preferences And Technology 40 -- 2.2 Wage Bargaining And Equilibrium Concept 41 -- 2.3 Nonconvexity Of The Set Of Feasible Payoffs 43 -- 3 Market Equilibria With Wage Dispersion 44 -- 3.1 Bellman Values 44 -- 3.2 Subgame Perfect Equilibria Of The Bargaining Game 45 -- 3.3 Other Market Equilibria 46 -- 3.4 Wage Lotteries 48 -- 4 Degenerate Market Equilibria 49 -- 4.1 Single Wage Market Equilibrium 49 -- 4.2 Many-wage Market Equilibria 50 -- 5 Heterogeneous Firms 52 --^ 5.1 Definition Of Equilibrium 52 -- 5.2 Testable Implications 54 -- 5.3 Comparison With Burlett And Mortensen (1998) 55 -- Chapter 3 Alternative Theories Of Wage Dispersion / Damien Gaumont, Martin Schindler, Randall Wright 61 -- 2 Ex Ante Heterogeneity 64 -- 2.1 A Simple Model 64 -- 2.2 Alternative Assumptions 69 -- 3 Ex Post Heterogeneity 71 -- 3.1 Permanent Shocks 71 -- 3.2 The Law Of Two Wages 73 -- 4 Other Models 75 -- 4.1 Transitory Shocks 75 -- 4.2 A Crime Model 77 -- 5 Ex Ante And Ex Post Combined 79 -- Chapter 4 Wage Differentials, Discrimination And Efficiency / Shouyong Shi 83 -- 2 The Model 87 -- 2.1 Workers And Firms 87 -- 2.2 A Candidate Equilibrium 89 -- 3 The Candidate Is The Unique Equilibrium 91 -- 3.1 Separation Is Not An Equilibrium 92 -- 3.2 Firms Rank The Two Types Of Workers Strictly 94 -- 3.3 High-productivity Workers Have The Priority 95 -- 4 Properties Of The Equilibrium And The Social Optimum 97 -- 5 Extension To Many Types Of Workers 100 --^ 5.1 The Equilibrium And Its Properties 100 -- 5.2 Numerical Examples 104 -- Appendix A Proof Of Proposition 3 109 -- Appendix B Proof Of Proposition 4 111 -- Chapter 5 Labor Market Search With Two-sided Heterogeneity: Hierarchical Versus Circular Models / Pieter A. Gautier, Coen N. Teulings, Aico Van Vuuren 117 -- 2 The Circular Job Search Model 121 -- 2.1 Production 121 -- 2.2 Labor Supply 122 -- 2.3 Labor Demand 122 -- 2.4 Job Search Technology 122 -- 2.5 Wage Setting 123 -- 2.6 Free Entry Condition 123 -- 3 Equilibrium Conditions 123 -- 4 Characterization Of The Equilibrium 125 -- 5 The Cost Of Search 126 -- Chapter 6 The Weak Pareto Law In Burdett-mortensen Equilibrium Search Models / Gerard J. Van Den Berg 133 -- 2 Model Framework 134 -- 2.1 The Burdett-mortensen Equilibrium Search Model With Heterogeneous Productivity Across Firms 134 -- 2.2 Remuneration Of Firm Owners 137 -- 3 The Right-hand Tail Of The Income Distribution 138 -- 3.1 Finite Maximum Wage 138 --^ 3.2 Tail Weight Indicators 138 -- 3.3 Mandelbrot's Weak Pareto Law 140 -- Appendix Proof Of Proposition 1 143 -- Chapter 7 Competitive Auctions: Theory And Application / John Kennes 145 -- 2 Competitive Auctions 149 -- 2.1 The Model 149 -- 2.2 The Bidding Game 149 -- 2.3 Buyers Choice Of Seller To Bid For 150 -- 2.4 Sellers' Reserve Price Choice 150 -- 2.5 A Large Market 151 -- 3 Dynamics 151 -- 3.1 The Model 151 -- 3.2 Equilibrium 153 -- 4 The Mortensen Rule 153 -- 4.1 Efficient Entry 153 -- 4.2 Efficient Technology Dispersion 155 -- 4.3 Efficient Job Creation 156 -- 5 On-the-job Search 156 -- 5.1 The Model 156 -- 5.2 Equilibrium 158 -- 6 What Makes A Seller? 158 -- 7 Wages 159 -- 8 Price Posting 160 -- 9 Imperfect Information 161 -- 9.1 The Model 161 -- 10 Further Applications 163 -- Chapter 8 Block Assignments / Michael Sattinger 169 -- 2 Model 171 -- 3 Optimal Dividing Values 173 -- 4 Worker And Employer Behavior 174 --^ Chapter 9 Social Security And Intergenerational Redistribution / Joydeep Bhattacharya, Robert R. Reed 183 -- 2 The Model 186 -- 2.1 Environment 186 -- 2.3 The Labor Market 188 -- 2.4 Costs 189 -- 2.5 Specification Of Labor Market Policies 190 -- 2.6 Workers' Payoffs 191 -- 2.7 Payoffs To Firms 192 -- 2.8 Matching 192 -- 3 Bargaining And Wage Determination 193 -- 3.1 Wage Functions 193 -- 3.2 Discussion Of The Wage Function For The Young 194 -- 4 Equilibrium 196 -- 4.1 Definition And Existence 196 -- 4.2 Labor Market Participation Conditions 196 -- 4.3 Equilibrium Entry Condition 198 -- 4.4 Partial Equilibrium Effects Of Increasing The Generosity Of Benefits 199 -- 5 The Absence Of Policy 201 -- 6 Are Pension Programs Welfare Enhancing? 203 -- Appendix A Proof Of Lemma 1 210 -- Appendix B Proof Of Lemma 2 210 -- Appendix C Proof Of Lemma 3 211 -- Appendix D Proof Of Lemma 4 212 -- Appendix E Proof Of Proposition 5 213 -- Iii Microeconometric Papers --^ Chapter 10 The Job Ladder / Audra J. Bowlus, George R. Neumann 217 -- 2 Earnings Growth In U.s. Census Data 219 -- 3 The Burdett-mortensen Equilibrium Search Model 220 -- 4 Data Description 221 -- 5 Fitting The Earnings Distribution 10 Years In The Future 222 -- 6 Downward Wage Mobility 227 -- Chapter 11 Heterogeneity In Firms' Wages And Mobility Policies / J.m. Abowd, F. Kramarz, S. Roux 237 -- 2 A Simple Theory Of Wages, Productivity, And Mobility 239 -- 3 A General Set Of Wage And Mobility Equations 244 -- 3.1 Starting-wage Equation 244 -- 3.2 The Firm-specific Model For Wages And Mobility 246 -- 4 Data Description 248 -- 4.1 The Dads 248 -- 5 Estimation Results 249 -- 5.1 Starting Wages 249 -- 5.2 The Firm-specific Wage And Mobility Equations 249 -- Appendix A The Likelihood Function For The Firm-specific Model Of Wages And Mobility 263 -- Appendix B Starting-wage Equation Estimates 266 -- Appendix C Estimation Of The Corrected Covariance Matrix 266 --^ Chapter 12 The Empirical Content Of The Job Search Model: Labor Mobility And Wage Distributions In Europe And The U.s. / Gregory Jolivet, Fabien Postel-vinay, Jean-marc Robin 269 -- 2 Facts About Worker Turnover And Wages 271 -- 2.1 A Brief Description Of The Sample 272 -- 2.2 Worker Turnover 273 -- 2.3 Wages 276 -- 3 A Simple Model Of Worker Turnover 278 -- 3.1 The Environment 278 -- 3.2 Individual Labor Market Transitions 280 -- 3.3 Stationary Worker Flows And Stocks 281 -- 4 Structural Estimation 283 -- 4.1 Estimation Procedure 283 -- 4.2 Results 285 -- 5 Fit 288 -- 5.1 Transitions Across Employment States 288 -- 5.2 Job Durations 291 -- 5.3 The Sampling Distributions Of Wage Offers 293 -- 5.4 Wage Mobility 296 -- 6 Identification And Specification Analysis 296 -- 6.1 Inference From Transition Data 297 -- 6.2 Inference From Both Transition And Duration Data 298 -- 6.3 Inference From Cross-sectional Wage Data 300 -- 6.4 Inference From Wage Mobility 302 -- Appendix Data 306 --^ Chapter 13 Job Changes And Wage Growth Over The Careers Of Private Sector Workers In Denmark / Paul Bingley, Niels Westergaard-nielsen 309 -- 1 Motivation 310 -- 2 The Literature 311 -- 3 The Descriptive Model 313 -- 4 Data 315 -- 5 Estimation 321 -- Chapter 14 Identification And Inference In Dynamic Programming Models / Bent J. Christensen, Nicholas M. Kiefer 331 -- 2 Dynamic Programming: The Marketing Example 334 -- 3 Discrete States And Controls 335 -- 4 Identification: A Preview 337 -- 5 Likelihood Functions 339 -- 6 Measurement Error 346 -- 7 Imperfect Control 350 -- 8 Random Utility Models 354 -- 9 A Continuously Distributed Utility Shock 356 -- 10 Continuous State And Optimal Stopping: The Search Model 358 -- Chapter 15 On Estimation Of A Two-sided Matching Model / Linda Y. Wong 365 -- 2 The Model 367 -- 3 Data 368 -- 4 Estimation Strategy 370 -- 4.1 Specification 370 -- 4.2 The Likelihood Function And Solution Method 372 -- 5 Results 374 -- 5.1 A Low Interest Rate 374 --^ 5.2 A High Interest Rate 374 -- 5.3 Subsamples 375 -- 5.4 Characteristics Of The Baseline Model 375 -- 5.5 Regime 1 376 -- 5.6 Regime 2 379 -- Chapter 16 A Structural Nonstationary Model Of Job Search: Stigmatization Of The Unemployed By Job Offers Or Wage Offers? / Stefan Lollivier, Laurence Rioux 381 -- 2 The Data 385 -- 3 The Empirical Implementation Of A Structural Nonstationary Job Search Model 389 -- 3.1 The Model 389 -- 3.2 Parameterization 392 -- 3.3 Likelihood Of The Sample 393 -- 4 Results 397 -- 5 Simulation Of Different Economic Policy Changes 405 -- 5.1 Reform A: 14% Increase In Insurance Benefits, Keeping Unchanged The Declining Time Sequence 405 -- 5.2 Reform B: The Replacement Of The Declining Time Sequence Of Ui Benefits By A Constant Sequence 407 -- 5.3 Reform C: The Reform B Combined With The Imposition Of Punitive Sanctions If Two Job Offers Are Refused 409 -- 5.4 Reform D: A 3-month Increase In The Duration Of Ui Entitlement 410 --^ Chapter 17 Can Rent Sharing Explain The Belgian Gender Wage Gap? / Francois Rycx, Ilan Tojerow 413 -- 2 Theoretical Framework 416 -- 3 Description Of The Data 418 -- 4 Empirical Analysis 419 -- 4.1 Benchmark Specification 420 -- 4.2 Group Effects 422 -- 4.3 Individual And Firm Characteristics 422 -- 4.4 Industry Wage Differentials 423 -- 4.5 Endogeneity Of Profits 424 -- 4.6 Rent Sharing For Men And Women 425. Bargaining, On-the-job Search And Labor Market Equilibrium / Ken Burdett And Roberto Bonilla -- On-the-job Search And Strategic Bargaining / Robert Shimer -- Alternative Theories Of Wage Dispersion / Damien Gaumont, Martin Schindler And Randall Wright -- Wage Differentials, Discrimination And Efficiency / Shouyong Shi -- Labor Market Search With Two-sided Heterogeneity : Hierarchical Versus Circular Models / Pieter A. Gautier, Coen N. Teulings And Aico Van Vuuren -- The Weak Pareto Law In Burdett-mortensen Equilibrium Search Models / Gerard J. Van Den Berg -- Competitive Auctions : Theory And Application / John Kennes -- Block Assignments -- Michael Sattinger -- Social Security And Intergenerational Redistribution / Joydeep Bhattacharya And Robert R. Reed -- The Job Ladder / Audra J. Bowlus And George R. Neumann -- Heterogeneity In Firms' Wages And Mobility Policies / J.m. Abowd, F. Kramarz And S. Roux --^ The Empirical Content Of The Job Search Model : Labor Mobility And Wage Distributions In Europe And The U.s. / Grégory Jolivet, Fabien Postel-vinay And Jean-marc Robin -- Job Changes And Wage Growth Over The Careers Of Private Sector Workers In Denmark / Paul Bingley And Niels Westergaard-nielsen -- Identification And Inference In Dynamic Programming Models / Bent J. Christensen And Nicholas M. Kiefer -- On Estimation Of A Two-sided Matching Model / Linda Y. Wong -- A Structural Nonstationary Model Of Job Search : Stigmatization Of The Unemployed By Job Offers Or Wage Offers? / Stéfan Lollivier And Laurence Rioux -- Can Rent Sharing Explain The Belgian Gender Wage Gap? / Francois Rycx And Ilan Tojerow -- Modeling Individual Earnings Trajectories Using Copulas : France, 1990-2002 / Stéphane Bonhomme And Jean-marc Robin -- Amplification Of Productivity Shocks : Why Don't Vacancies Like To Hire The Unemployed? / Éva Nagypál --^ Evaluating The Performance Of The Search And Matching Model / Eran Yashiv -- Productivity Growth And Worker Reallocation : Theory And Evidence / Rasmus Lentz And Dale T. Mortensen. Henning Bunzel ... [et Al.]. Includes Bibliographical References And Index.