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An Empirical Model of Wage Dispersion with Sorting

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  • Rasmus Lentz

    (University of Wisconsin-Madison)

  • Jesper Bagger

    (University of Aarhus)

Abstract

(negative) sorting results if the match production function is supermodular (submodular). If the production function is modular, no sorting obtains. We propose an identification strategy that allows identification of not only the presence of sorting in matching, but also the type of sorting, negative or positive. Like Eeckhout and Kircher (2008) we find that the commonly used wage decomposition in Abowd, Kramarz, and Margolis (1999) does not in itself identify sorting, although the mechanisms that lead to lack of identification in our model differ from that of the partnership model studied in Eeckhout and Kircher (2008).

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 964.

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Date of creation: 2009
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Handle: RePEc:red:sed009:964

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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  2. Bent Jesper Christensen & Rasmus Lentz & Dale T. Mortensen & George R. Neumann & Axel Werwatz, 2005. "On-the-Job Search and the Wage Distribution," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 31-58, January.
  3. Jan Eeckhout & Philipp Kircher, 2009. "Identifying Sorting - In Theory," PIER Working Paper Archive 09-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  4. Shimer, R. & Smith, L., 1998. "Assortive Matching and Search," Papers 98-09, Michigan - Center for Research on Economic & Social Theory.
  5. Postel-Vinay, Fabien & Robin, Jean-Marc, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," CEPR Discussion Papers 3548, C.E.P.R. Discussion Papers.
  6. Matthew S. Dey & Christopher J. Flinn, 2005. "An Equilibrium Model of Health Insurance Provision and Wage Determination," Econometrica, Econometric Society, vol. 73(2), pages 571-627, 03.
  7. Shintaro Yamaguchi, 2006. "Job Search, Bargaining, and Wage Dynamics," 2006 Meeting Papers 54, Society for Economic Dynamics.
  8. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
  9. Éva Nagypál, 2006. "On the extent of job-to-job transitions," 2006 Meeting Papers 10, Society for Economic Dynamics.
  10. Jean-Marc Robin & Costas Meghir & Jeremy Lise, 2008. "Matching, Sorting and Wages," 2008 Meeting Papers 273, Society for Economic Dynamics.
  11. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
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