How much do Workers Search?

Ping Yan

In this paper, I consider four determinants of wages: productivity, workers’ bargaining power, competition between employers due to on-the-job search, and search intensity by workers. Workers can increase their job offer arrival rate through costly search. Employers take into consideration the search intensity choices of their employees when the two parties jointly set wages. Using a Nash bargaining model with on-the-job search and wage renegotiation, I quantify the search intensity of workers, for both unemployed and employed. I estimate the structural model using the 2001 panel of the Survey of Income and Program Participation (SIPP) from the US, together with supplementary information from the American Time Use Survey (ATUS). The empirical results show that search intensity weakly declines as the worker gets a wage rise from her current job. But direct job-to-job transition does not necessarily imply higher wage and lower search intensity on the new job. Indeed, simulation suggests that, there are cases where workers on high-productivity jobs are most inclined to search, but the social returns to job search is highest in workers on low-productivity jobs. In this sense, the labor market equilibrium may not be socially efficient.