Section 4 relates the biases to wages and reservation income in the data, and Section 5 relates the biases to wages and reservation income in the model. [...] We estimate probit models of job separation probabilities for individuals employed at the time of the interview, and of job finding probabilities for those unemployed or out of the labor force at the time of the interview. [...] This amounts to a reduction in the unconditional wage gap by about 1.3 percentage points in the linear and about 2 percentage points in the non-linear case.23 We can also consider the gap in reservation incomes between East and West Germany 23For the counterfactual East German wages, we assign the difference in bias from Table B.12 (column 1), and use the estimated linear effect of job separation. [...] Third, we can quantify the effects of removing the bias in job sepa- ration or job finding expectations, or both, on the labor market equilibrium and on the 24For the counterfactual East German reservation incomes, we assign the difference in bias from Table B.15 (column 1), and use the estimated linear effect of job finding bias from Table 3 (column 3), and the estimated non-linear effect of job. [...] Because the bargained wage affects the current as well as the future values of the match, this implies that the wage level not only determines how the match surplus is split between the two parties, but also the size of the total surplus.
- Pages
- 80
- Published in
- Germany
