Labor Market Institutions and Wage Formation in an Economy with Search Frictions

Abstract

"During the last thirty years, the prevailing view of aggregate labor markets in macroeconomics has changed dramatically. The traditional view of a spot labor market that consists of stocks of demand and supply meeting every period was overtaken by the so-called flow approach. This approach is based on micro-level observations that show that aggregate employment changes arise from simultaneous worker-flows from non-employment to employment and vice versa. Up until now, the Diamond-Mortensen-Pissarides search and matching model (Diamond, 1982a,b; Mortensen, 1982a,b; Mortensen and Pissarides, 1994) has become the standard framework of the flow approach for the macroeconomic analysis of labor markets. In this model, job seekers and employers have to spend time and money in order to find a suitable trading partner before forming a match and starting production. The main building block of this framework is the aggregate matching function. The search and matching model and its modifications build the foundations of the following analyses. This thesis aims at contributing to a better understanding with The search and matching model and its modifications build the foundations of the following analyses. This thesis aims at contributing to a better understanding with in a frictional labor market to study the effects of labor market duality on labor market dynamics. Chapter 3 explores the effects of heterogeneity in idiosyncratic match quality in a matching model with on-the-job search in order to explore the empirically observed history dependence in wages. Chapter 4 analyzes the allocation of workers to jobs in the German labor market, using a matching model with two-sided heterogeneity. These topics are dealt with in the subsequent three self-contained essays. In the following, I will describe the contribution of each essay and the relation to the existing literature in more detail." (Text excerpt, IAB-Doku) ((en))

Cite article

Lochner, B. & Schulz, B. (2016): Labor Market Institutions and Wage Formation in an Economy with Search Frictions. Erlangen, 181 p.