Working Paper: NBER ID: w24074
Authors: Katarna Borovikov; Robert Shimer
Abstract: We develop a new approach to measuring the correlation between the types of matched workers and firms. Our approach accurately measures the correlation in data sets with many workers and firms, but a small number of independent observations for each. Using administrative data from Austria, we find that the correlation between worker and firm types lies between 0.4 and 0.6. We use artificial data sets with correlated worker and firm types to show that our estimator is accurate. In contrast, the Abowd, Kramarz and Margolis (1999) fixed effects estimator suggests no correlation between types in our data set. We show both theoretically and empirically that this reflects an incidental parameter problem.
Keywords: Labor Market; Sorting; Wages; Firm Types
JEL Codes: E24; J3; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| worker and firm types (J29) | correlation (C10) |
| method (Y60) | correlation (C10) |
| heterogeneity (D29) | correlation (C10) |
| measurement issue (C52) | previous estimates (C51) |
| high wage workers (J31) | high wage firms (J31) |