HEDONIC WAGES AND LABOR-MARKET SEARCH

This article investigates the consequences of labor market search for the theory of hedonic wages. We find that the introduction of search h as surprising consequences for the theory of hedonic wages. In particu lar, we demonstrate that the equilibrium distribution of wage and nonw age amenity bundles generally bears little resemblance to workers' und erlying preferences. A consequence of this analysis is that estimates of workers' marginal willingness to pay, derived from the conventional hedonic wage methodology, are biased. In addition, we demonstrate tha t search generates differences between firm-level and employee-level d ata that can cause substantial deviations in the estimates of hedonic wage equations.