GoTriple's project summary
WASP is aimed at developing realistic empirical equilibrium search models of the labour market, with heterogeneous agents and long-term self-enforcing contracts, that• Can help better understand rent sharing mechanisms in labour markets, • Allow for multiple sources of productivity dynamics, including deterministic human capital accumulation and idiosyncratic productivity shocks, • Do not rule out sorting by assumption, nor the possibility of mismatch – as in perfectly competitive Beckerian marriage models, • Can fit linked employer-employee data in all three dimensions: across workers, firms and time, • Can be used for policy evaluation.These research questions will be addressed within six different sub-projects:1.Understanding tenure effects. Human capital accumulation and productivity shocks are introduced in a search-matching framework to explain the difference between tenure and experience effects.2.Employment protection policies, wage dynamics and sorting. A search-matching model with productivity shocks is estimated on worker data and used to discuss the optimal design of employment protection policies.3.Large firms, sorting and linked employer-employee data. Firms post more than one job offer. The model permits the use of linked employer-employee data for estimation.4.Risk-aversion, savings and risk sharing. Risk-averse workers, subject to productivity shocks, are matched with risk-neutral employers. The model is used to measure the relative importance of self-insurance vis-à-vis insurance provided by the employer.5.Unemployment, wage inequality and business cycle. Allowing for aggregate productivity shocks in a search-matching model with worker heterogeneity can explain the unemployment volatility puzzle and the effect of business cycles on the wage distribution.6.Marriage, search and welfare policy. The intra-household resource allocation process is endogenised in a search model of marriage.