Resource title

Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation

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Resource description

We introduce different skill groups and production functions into the Burdett-Mortensen equilibrium search model. Supermodularity in the production process leads to a positive intrafirm wage correlation between skill groups. Theory implies that increasing returns to scale can lead to a unimodal earnings density with a decreasing right tail even in the absence of productivity dispersion. Our empirical results indicate economy-wide increasing returns to scale. We use the structural estimates of the production parameters to investigate whether private returns toeducation equal social returns. Our estimates suggest a positive welfare effect from increasing the share of medium-skilled agents in the workforce.

Resource author

Andrey Launov, Christian Holzner

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Resource publish date

Resource language

eng

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text/html

Resource resource URL

http://hdl.handle.net/10419/22357

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Adapt according to the presented license agreement and reference the original author.