“Essays in Search and Matching in Labor Markets”

Abstract

This thesis studies the relevance of labour market frictions through two di↵erent research questions. The goal is to highlight that this kind of frictions may explain some phenomena which may seem quite counterintuitive at first sight but, when looking into the detail, labour market frictions provide us reasonable explanations to the events that we observe in workers’ dynamics. Chapter 1 studies that -in job-to-job (JTJ) transitions- wage cuts are often associated with lower continuation values for workers when comparing the new job with the former one. However, when considering a job o↵er workers may trade-o↵ other non-monetary features of the o↵er that compensate current wage losses. In this paper, I study which is the trade-o↵ that workers face when accepting a wage cut. Using data from the Chilean Unemployment Insurance registry, I show that job-to-job transitions are positively associated with ex-post wage growth. Besides, conditional on a JTJ transition, workers who accept wage cuts show higher wage growth rates in their destination firms. These facts are robust to changing the composition of jobs and workers over the business cycle. In Chapter 2, using data for the Chilean mining sector, we provide SVAR evidence in order to answer the research question regarding what are the distributional consequences that commodity price shocks have in labour market outcomes for heterogeneous workers at business cycles frequencies in a Small Open Economy (SOE). We show that an unexpected impulse in commodity prices increases the wage premium between high and low-skilled workers and, at the same time, it decreases the employment level ratio between high skilled and low skilled workers. The latter constitutes a novel finding in the literature of commodity price shocks. In order to rationalize these findings, we build a DSGE-SOE model with asymmetric search and matching (SAM) frictions. The theoretical model, calibrated and estimated with Chilean data, achieves to replicate the empirical labour market dynamics that come from an unexpected increase in the commodity price for the small open economy. Besides, we find that the principal parameters that determine how the commodity shock is going to a↵ect labour market outcomes between high and low-skilled workers are the Nash bargaining power of workers, and the skill intensity in commodity production. The former a↵ects the distribution of wages, and the latter a↵ects the employment level distribution among high and low-skilled workers. The contribution of this thesis is twofold. First, it shows robust evidence regarding that workers face a trade-o↵ between current wages and future wage growth rates when facing a job o↵er. This may have several policy implications regarding, for example, unemployment insurance or pension savings policy. Second, this thesis provides novel evidence in a commodity sector for a developing country- regarding that commodity price shocks may a↵ect in di↵erent directions both the employment and wage gaps for workers with di↵erent levels of education. In this regard, it also o↵ers a structural model in which labour market frictions explain this novel phenomena observed in the data.