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Wage Sorting Trends

  • Jesper Bagger

    (Royal Holloway College, UK)

  • Rune Vejlin


    (Department of Economics and Business, Aarhus University, Denmark)

  • Kenneth L. Sørensen

    (Department of Economics and Business, Aarhus University, Denmark)

Using a population-wide Danish Matched Employer-Employee panel from 1980-2006, we document a strong trend towards more positive assortative wage sorting. The correlation between worker and firm fixed effects estimated from a log wage regression increases from -0.07 in 1981 to .14 in 2001. The nonstationary wage sorting pattern is not due to compositional changes in the labor market, primarily occurs among high wage workers, and comprises 41 percent of the increase in the standard deviation of log real wages between 1980 and 2006. We show that the wage sorting trend is associated with worker reallocation via voluntary quits.

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Paper provided by Department of Economics and Business Economics, Aarhus University in its series Economics Working Papers with number 2012-17.

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Length: 15
Date of creation: 09 Aug 2012
Date of revision:
Handle: RePEc:aah:aarhec:2012-17
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  1. Philipp Kircher & Jan Eeckhout, 2009. "Identifying Sorting, In Theory," 2009 Meeting Papers 581, Society for Economic Dynamics.
  2. David Margolis, 1995. "High Wage Workers and High Wage Firms," Post-Print halshs-00378229, HAL.
  3. Gruetter, Max & Lalive, Rafael, 2009. "The importance of firms in wage determination," Labour Economics, Elsevier, vol. 16(2), pages 149-160, April.
  4. Dirk Krueger & Fabrizio Perri & Luigi Pistaferri & Giovanni L. Violante, 2009. "Cross Sectional Facts for Macroeconomists," NBER Working Papers 15554, National Bureau of Economic Research, Inc.
  5. M. J. Andrews & L. Gill & T. Schank & R. Upward, 2008. "High wage workers and low wage firms: negative assortative matching or limited mobility bias?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(3), pages 673-697.
  6. Cristian Bartolucci & Francesco Devicienti, 2012. "Better Workers Move to Better Firms: A Simple Test to Identify Sorting," Carlo Alberto Notebooks 259, Collegio Carlo Alberto.
  7. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
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