Labor market search and schooling investment

Christopher Flinn, Joseph Mullins

Research output: Contribution to journalArticlepeer-review

21 Scopus citations


We generalize a search, matching, and bargaining model to allow individuals to acquire productivity-enhancing schooling prior to labor market entry. In general, search frictions and weakness in bargaining position contribute to underinvestment in schooling from an efficiency perspective. Using estimates of a general equilibrium version of the model in which firm vacancy creation decisions are included, we find that minimum wages and schooling subsidies improve aggregate welfare, but have very different welfare impacts across the ability distribution. In particular, policies that maximize the average welfare of workers have strongly negative effects on the welfare of the least able.

Original languageEnglish (US)
Pages (from-to)359-398
Number of pages40
JournalInternational Economic Review
Issue number2
StatePublished - May 1 2015
Externally publishedYes

Bibliographical note

Publisher Copyright:
© (2015) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.


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