This paper discusses a general equilibrium model of the assignment of heterogeneous workers to heterogeneous jobs. Both jobs and workers are measured along a continuous one-dimensional scale. The composition of labor supply is represented by a distribution function. Workers maximize their earnings. Highly skilled workers have an absolute advantage in all jobs and a comparative advantage in complex jobs. Utility is represented by a constant elasticity of substitution function defined over the output of an infinite number of jobs. Equilibrium is characterized by a mapping of skills on complexities. The model is able simultaneously to explain the remuneration of skill, the allocation of skills to jobs, and variations in labor demand per job type. Estimation results for the Netherlands for 1982 and 1988 offer support for its relevance. Wage differentials are due mainly to skill differentials in the left tail of the distribution and to differences between jobs in the right tail.

I apply Ricardo’s principle of comparative advantage to a theory of factor substitutability in a model with a continuum of worker and job types. Highly skilled workers have a comparative advantage in complex jobs. The model satisfies the distance‐dependent elasticity of substitution (DIDES) characteristic: substitutability between types declines with their skill distance. I analyze changes in relative wages due to human capital accumulation. The concept of a complexity dispersion parameter or compression elasticity is introduced. Empirical studies suggest its value to be equal to two: a 1 percent increase in the stock of human capital reduces the Mincerian return by 2 percent.

This paper discusses a general equilibrium model of the assignment of heterogeneous workers to heterogeneous jobs. Both jobs and workers are measured along a continuous one-dimensional scale. The composition of labor supply is represented by a distribution function. Highly skilled workers have an absolute advantage in all jobs and a comparative advantage in complex jobs. Equilibrium is characterized by a mapping of skills on complexities. The model is able simultaneously to explain the remuneration of skill, the allocation of skills to jobs, and variations in labor demand per job type. Estimation results for the Netherlands offer support for its relevance.

This paper describes a search model with a continuum of worker and job types, free entry and transferable utility. We apply a second-order Taylor expansion to characterize the equilibrium, derive the "cost of search" and show that it is decreasing in the substitutability of worker types. This cost of search is then decomposed into three components: unemployment, vacancy costs and mismatch. Our contact technology rules out congestion effects between different worker types and therefore exhibits increasing returns to scale. One third of those increasing returns in contacts are shown to be absorbed by firms and workers being more choosy. The resulting equilibrium is not efficient. Unemployment benefits can reduce the loss by serving as a search subsidy. Numerical simulations of the model show that our Taylor expansions are quite accurate.

We derive a structural index for labor market density based on the Ellison-Glaeser index for industry concentration. The labor market density index serves as a proxy for the number of workers that are potentially available for jobs in a particular area. The index is based on observed home-work location patterns. It is particularly useful for testing theories where the scale of the market matters. We apply this index to a standard wage equation and find that it explains almost half of the cross-region wage variance.

This paper characterizes the equilibrium for a large class of search models with two-sided heterogeneity and on-the-job search. Besides the well-known congestion externalities, we show that on-the-job search in combination with monopsonistic wage setting without commitment creates a “business-stealing” externality. In the absence of congestion effects, this leads to excessive vacancy creation. Under wage setting with commitment this externality is absent because when posting a wage, firms take into account the expected productivity of future workers in their current jobs. If firms are able to make and respond to counteroffers, then they will not have to pay no-quit premia and this also leads to excessive vacancy creation.

This study documents two empirical facts using matched employer-employee data for Denmark and Portugal. First, workers who are hired last, are the first to leave the firm. Second, workers' wages rise with seniority (= a worker's tenure relative to the tenure of her colleagues). The identification problems for the wage return to tenure are shown not to apply to the return to seniority because seniority is not a deterministic function of time. Controlling for tenure, the probability of leaving the firm decreases with seniority. The increase in expected seniority with tenure explains a large part of the negative duration dependence of the hazard. Using a variety of estimation methods, we show that a 10% increase in seniority raises your wage by 0.1-0.2%, depending on the country and the method applied. Conditional on ten years of tenure, one standard deviation of seniority raises your wage by 0.5 to 1.6 percent. Forthcoming in Econometrica.