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Better Workers Move to Better Firms: A Simple Test to Identify Sorting

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  • Cristian Bartolucci
  • Francesco Devicienti

Abstract

We propose a test that uses information on workers’ mobility, wages and firms’ profits to identify the sign and strength of assortative matching. The basic intuition underlying our empirical strategy is that, in the presence of positive (negative) assortative matching, good workers are more (less) likely to move to better firms than bad workers. Assuming that agents’ payoffs are increasing in their own types allows us to use within-firm variation on wages to rank workers by their types and firm profits to rank firms. We exploit a panel data set that combines Social Security earnings records for workers in the Veneto region of Italy with detailed balance-sheet information for employers. We find robust evidence that positive assortative matching is a pervasive phenomenon in the labor market. This result is in contrast with what we find from correlating the worker and firm fixed effects in standard Mincerian wage equations.

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Bibliographic Info

Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 259.

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Length: 46 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:cca:wpaper:259

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Keywords: Assortative matching; workers’ mobility; matched employer-employee data.;

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Citations

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Cited by:
  1. Gabriel Burdin, 2013. "Equality under threat by the talented:evidence from worker-managed firms," Department of Economics University of Siena 694, Department of Economics, University of Siena.
  2. Michele Battisti, 2013. "High Wage Workers and High Wage Peers," Ifo Working Paper Series Ifo Working Paper No. 168, Ifo Institute for Economic Research at the University of Munich.
  3. Ryan Michaels & Michele Battisti, 2013. "Coordinated labor Supply within the Firm: Evidence and Implications," 2013 Meeting Papers 1116, Society for Economic Dynamics.
  4. Jesper Bagger & Rune Vejlin & Kenneth L. Sørensen, 2012. "Wage Sorting Trends," Economics Working Papers 2012-17, School of Economics and Management, University of Aarhus.
  5. Merlino, Luca Paolo & Parrotta, Pierpaolo & Pozzoli, Dario, 2014. "Gender Differences in Sorting," Working Papers 01-2014, Copenhagen Business School, Department of Economics.

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