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Supply, Demand, Institutions, and Firms: A Theory of Labor Market Sorting and the Wage Distribution

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  • Daniel Haanwinckel

Abstract

This paper builds a general equilibrium framework with firm and worker heterogeneity, monopsony power, and task-based production to quantify the long-run effects of education, biased demand shocks, and minimum wage. I take it to Brazilian data for 1998 and 2012 and find that (i) supply and demand shocks increase sorting of high-wage workers to high-wage firms, (ii) increased entry of high-wage firms boosts the effect of rising schooling attainment on mean log wages by 25%, and (iii) the minimum wage reduces formal wage inequality but also causes wage loss for mid-productivity workers and disemployment for those at the very bottom.

Suggested Citation

  • Daniel Haanwinckel, 2023. "Supply, Demand, Institutions, and Firms: A Theory of Labor Market Sorting and the Wage Distribution," NBER Working Papers 31318, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31318
    Note: LS
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    Cited by:

    1. Sergio Pinheiro Firpo & Alysson Lorenzon Portella, 2024. "The labor market in Brazil, 2001–2022," IZA World of Labor, Institute of Labor Economics (IZA), pages 4412-4412, April.
    2. Daniel Haanwinckel, 2023. "Does regional variation in wage levels identify the effects of a national minimum wage?," Papers 2307.01284, arXiv.org, revised Nov 2023.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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