This pap er develops a "two-tiered frontier" estimation procedure to decompose the residual of an earnings function into three components. The first component can be interpreted as being purely random. Search theory is used to show that the other two components represent employee and employer...

Korea has adopted the labor institutions of Japan, which are noted for ensuring industrial peace unparalleled elsewhere, fostering worker-management cooperation: company unionism, no temporary layoffs, synchronized annual contracts, seniority-based wages, and the bonus system. Yet the labor...