Search Friction in the U.S. Labor Market

In this paper we determine the feasibility of using data from thePanel Study of Income Dynamics to estimate the Burdett-Mortensen general equilibrium search model. The data contain sufficient information on wages, labor force states, durations, and transitions to generate estimates of the model's structural parameters. Our analysis compares the relative labor market search friction forblack and white male household heads. In general we find blacks face greater search friction while unemployed than whites, but a similar level while employed. Within the model this finding implies substantial productivity differentials are needed to generate the black-white wage differentials found in the data.