Starting Wages,Hires and Separations

We study the empirical relationship between the hiring rate, separation rate and starting wages. A practical empirical model is set up and estimated on Danish matched employer-employee longitudinal data for the period 1980--1995. We find (1) firm heterogeneity is important in all dimensions of our model: starting wages, time between hires and employment length (2) matching between firms and workers is exogenous (3) friction effects in the determination of wages are very small, which suggests that the Danish labour market is close to competitive.