Endogenous wage dispersion in a search-matching model

In this paper, we extend a job search-matching model with firm-specific investments in training, originally developed by Mortensen (Equilibrium Unemployment with Wage Posting: Burdett-Mortensen Meet Pissarides. In: Bunzel et al. (Eds.), Panel Data and Structural Labour Market Models, Amsterdam, North-Holland, 281-292), to allow for different offer arrival rates in employment and unemployment. The extension allows for extra flexibility when the model is confronted with real data. We subsequently estimate the parameters of the model on Danish labour market data using a structural nonparametric estimation procedure. We find that the model provides a good characterization of some empirical features of the labor market. (C) 2003 Elsevier B.V. All rights reserved.