High Wage Workers Match with High Wage Firms: Clear Evidence of the Effects of Limited Mobility Bias
AbstractPositive assortative matching implies that high productivity workers and firms match together. However, there is almost no evidence of a positive correlation between the worker and firm contributions in two-way fixed-effects wage equations. This could be the result of a bias caused by standard estimation error. Using German social security records we show that the effect of this bias is substantial in samples with limited inter-firm movement. The correlation between worker and firm contributions to wage equations is unambiguously positive.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6662.
Length: 13 pages
Date of creation: Jun 2012
Date of revision:
Publication status: published in: Economics Letters, 2012, 117 (3), 824-827
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Other versions of this item:
- Andrews, M.J. & Gill, L. & Schank, T. & Upward, R., 2012. "High wage workers match with high wage firms: Clear evidence of the effects of limited mobility bias," Economics Letters, Elsevier, vol. 117(3), pages 824-827.
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-01 (All new papers)
- NEP-BEC-2012-07-01 (Business Economics)
- NEP-EFF-2012-07-01 (Efficiency & Productivity)
- NEP-LAB-2012-07-01 (Labour Economics)
- NEP-LMA-2012-07-01 (Labor Markets - Supply, Demand, & Wages)
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