Working Paper: NBER ID: w20472
Authors: John M. Abowd; Francis Kramarz; Sébastien Pérez-Duarte; Ian M. Schmutte
Abstract: We test for sorting of workers between and within industrial sectors in a directed search model with coordination frictions. We fit the model to sector-specific vacancy and output data along with publicly-available statistics that characterize the distribution of worker and employer wage heterogeneity across sectors. Our empirical method is general and can be applied to a broad class of assignment models. The results indicate that industries are the loci of sorting-more productive workers are employed in more productive industries. The evidence confirms assortative matching can be present even when worker and employer components of wage heterogeneity are weakly correlated.
Keywords: assortative matching; labor market sorting; vacancy rates; wage heterogeneity
JEL Codes: C1; E24; J24; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| industries serve as loci of sorting (L00) | more productive workers are employed in more productive industries (J29) |
| positive assortative matching occurs (C78) | more productive workers are employed in more productive industries (J29) |
| unobservable differences in worker productivity are positively correlated with unobservable differences in firm productivity (D29) | more productive workers are employed in more productive industries (J29) |
| observed correlation between worker and employer effects understates the true extent of assortative matching (J79) | more productive workers are employed in more productive industries (J29) |
| sorting is interpreted as a between-industry phenomenon (L16) | more productive workers are employed in more productive industries (J29) |
| more productive workers are positively sorted to more productive employers (J29) | interindustry wage differentials (J31) |