Identifying Sorting - In Theory

Eeckhout, Jan; Kircher, Philipp

doi:10.2139/ssrn.1338787

Cited by 84 publications

(135 citation statements)

References 32 publications

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“…However, in general, wage data alone does not suffice for identification of sorting. Indeed, as pointed out in section 2.2, as well as in Eeckhout andKircher (2011), Lopes de Melo (2008), and Lise et al (2013), because wages are not monotone in the productivity indices, worker and firm fixed effects obtained from wage regressions do not correctly rank workers and firms in terms skill levels and productivities, h and p. 14 The implication is that the correlation between estimated worker and firm fixed effects does not identify the correlation between worker skill and firm productivity indices in the steady state match distribution.…”

Section: Identificationmentioning

confidence: 67%

An Empirical Model of Wage Dispersion with Sorting

Bagger

Lentz

2014

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This paper studies wage dispersion in an equilibrium on-the-job-search model with endogenous search intensity. Workers differ in their permanent skill level and firms differ with respect to productivity. Positive (negative) sorting results if the match production function is supermodular (submodular). The model is estimated on Danish matched employer-employee data. We find evidence of positive assortative matching. In the estimated equilibrium match distribution, the correlation between worker skill and firm productivity is 0.12. The assortative matching has a substantial impact on wage dispersion. We decompose wage variation into four sources: Worker heterogeneity, firm heterogeneity, frictions, and sorting. Worker heterogeneity contributes 51% of the variation, firm heterogeneity contributes 11%, frictions 23%, and finally sorting contributes 15%. We measure the output loss due to mismatch by asking how much greater output would be if the estimated population of matches were perfectly positively assorted. In this case, output would increase by 7.7%.

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Section: Identificationmentioning

confidence: 67%

An Empirical Model of Wage Dispersion with Sorting

Bagger

Lentz

2014

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“…If instead mobility is based in part on comparative advantage then the expected wage losses associated with moving from A to B will tend to be offset by an improvement in match effects. In the limit, if all firm transitions are voluntary and selection is based solely on the match components, all moves will lead to wage gains, as in the dynamic matching model of Eeckhout and Kirchner (2011). In our analysis below we examine workers moving in opposite directions between groups of high and low wage firms, and find that their wage changes exhibit the approximate symmetry (i.e., equal magnitude and opposite sign)…”

Section: Iiia Exogeneitymentioning

confidence: 97%

“…Although the two-way effects model specified in equation (4) has been widely used over the past decade, the additive structure of the model and the restrictive assumptions needed for OLS estimation have been strongly criticized by some authors (e.g., Lopes de Melo, 2009;Eeckhout and Kirchner, 2011). Following Card, Heining and Kline (2013), we present some descriptive evidence on the patterns of wage changes for people who move between jobs with higher-and lower-paid co-workers.…”

Section: Descriptive Evidence On Firm-specific Pay Premiumsmentioning

confidence: 99%

Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women *

Card

Cardoso

Kline

2015

The Quarterly Journal of Economics

473

167

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There is growing evidence that firm-specific pay premiums are an important source of wage inequality. These premiums will contribute to the gender wage gap if women are less likely to work at high-paying firms or if women negotiate (or are offered) worse wage bargains with their employers than men. Using longitudinal data on the hourly wages of Portuguese workers matched with income statement information for firms, we show that the wages of both men and women contain firm-specific premiums that are strongly correlated with simple measures of the potential bargaining surplus at each firm. We then show how the impact of these firm-specific pay differentials on the gender wage gap can be decomposed into a combination of sorting and bargaining effects. We find that women are less likely to work at firms that pay higher premiums to either gender, with sorting effects being most important for low- and middle-skilled workers. We also find that women receive only 90% of the firm-specific pay premiums earned by men. Importantly, we find the same gender gap in the responses of wages to changes in potential surplus over time. Taken together, the combination of sorting and bargaining effects explain about one-fifth of the cross-sectional gender wage gap in Portugal.

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“…The absence of interactions between worker and firm attributes restricts complementarity patterns in earnings. However, since Gary Becker's work, numerous theories have emphasized the link between complementarity and sorting (Shimer andSmith, 2000, Eeckhout andKircher, 2011). In addition, the AKM model is static, in the sense that worker mobility does not depend on earnings realizations conditional on worker and firm heterogeneity, and that earnings after a job move do not depend on the previous firm's attributes.…”

Section: Introductionmentioning

confidence: 99%

A Distributional Framework for Matched Employer Employee Data

2017

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We propose a framework to identify and estimate earnings distributions and worker composition on matched panel data, allowing for two-sided worker-firm unobserved heterogeneity. We introduce two models: a static model that allows for nonlinear interactions between workers and firms, and a dynamic model that allows in addition for Markovian earnings dynamics and endogenous mobility. We establish identification in short panels, and develop tractable two-step estimators where firms are classified into heterogeneous classes in a first step. Applying our method to Swedish administrative data, we find that log-earnings are approximately additive in worker and firm heterogeneity, with a strong association between workers and firms, and a small relative contribution of firm heterogeneity to earnings dispersion. In addition, we document that wages have a direct effect on mobility, and that, beyond their dependence on the current firm, earnings after a job move also depend on the past firm.

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Identifying Sorting - In Theory

Cited by 84 publications

References 32 publications

An Empirical Model of Wage Dispersion with Sorting

An Empirical Model of Wage Dispersion with Sorting

Bargaining, Sorting, and the Gender Wage Gap: Quantifying the Impact of Firms on the Relative Pay of Women *

A Distributional Framework for Matched Employer Employee Data

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