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Sorting Between and Within Industries: A Testable Model of Assortative Matching

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  • John M. Abowd
  • Francis Kramarz
  • Sébastien Pérez-Duarte
  • Ian M. Schmutte

Abstract

We test Shimer's (2005) theory of the sorting of workers between and within industrial sectors based on directed search with coordination frictions, deliberately maintaining its static general equilibrium framework. We fit the model to sector-specific wage, vacancy and output data, including publicly-available statistics that characterize the distribution of worker and employer wage heterogeneity across sectors. Our empirical method is general and can be applied to a broad class of assignment models. The results indicate that industries are the loci of sorting-more productive workers are employed in more productive industries. The evidence confirms that strong assortative matching can be present even when worker and employer components of wage heterogeneity are weakly correlated.

Suggested Citation

  • John M. Abowd & Francis Kramarz & Sébastien Pérez-Duarte & Ian M. Schmutte, 2018. "Sorting Between and Within Industries: A Testable Model of Assortative Matching," Annals of Economics and Statistics, GENES, issue 129, pages 1-32.
  • Handle: RePEc:adr:anecst:y:2018:i:129:p:1-32
    DOI: 10.15609/annaeconstat2009.129.0001
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    Cited by:

    1. Erling Barth & James Davis & Richard B. Freeman, 2018. "Augmenting the Human Capital Earnings Equation with Measures of Where People Work," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 71-97.
    2. Shuaizhang Feng & Lars Lefgren & Brennan C. Platt & Bingyong Zheng, 2019. "Job search under asymmetric information: endogenous wage dispersion and unemployment stigma," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(4), pages 817-851, June.
    3. Dauth, Wolfgang & Findeisen, Sebastian & Moretti, Enrico & Südekum, Jens, 2018. "Matching In Cities," CEPR Discussion Papers 13347, C.E.P.R. Discussion Papers.
    4. Erling Barth & Alex Bryson & James C. Davis & Richard Freeman, 2016. "It's Where You Work: Increases in the Dispersion of Earnings across Establishments and Individuals in the United States," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 67-97.
    5. Andreas Gulyas, 2018. "Identifying Labor Market Sorting with Firm Dynamics," 2018 Meeting Papers 856, Society for Economic Dynamics.
    6. Kramarz, Francis & Martin, Julien & Mejean, Isabelle, 2020. "Volatility in the small and in the large: The lack of diversification in international trade," Journal of International Economics, Elsevier, vol. 122(C).
    7. John Kennes & Daniel le Maire, 2016. "On the equivalence of buyer and seller proposals within canonical matching and pricing environments," Economics Working Papers 2016-10, Department of Economics and Business Economics, Aarhus University.
    8. Cornwell, Christopher & Schmutte, Ian M. & Scur, Daniela, 2019. "Building a productive workforce: the role of structured management practices," LSE Research Online Documents on Economics 103404, London School of Economics and Political Science, LSE Library.
    9. Cornwell, Christopher & Schmutte, Ian M. & Scur, Daniela, 2019. "Building a productive workforce: the role of structured management," CEPR Discussion Papers 13908, C.E.P.R. Discussion Papers.
    10. Kory Kantenga, 2016. "Sorting and Wage Inequality," 2016 Meeting Papers 660, Society for Economic Dynamics.

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    More about this item

    Keywords

    Wage Differentials; Human Capital; Skills; Job Matching; Simulation Methods;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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