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Complementarity and Advantage in the Competing Auctions of Skills

Author

Listed:
  • Alex Xi He

    (Department of Economics, MIT)

  • John Kennes

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

  • Daniel le Maire

    (University of Copenhagen)

Abstract

We use a directed search model to develop estimation procedures for the identification of worker and firm rankings from labor market data. These methods allow for a general specification of production complementarities and the possibility that higher ranked workers are not more productive in all firms. We also offer conditions for a positive/negative assortative matching that incorporate the possibility of a stochastic job ladder with on-the-job search. Numerical simulations relate the implications of the model to the implications of fixed effect regressions and give further insights into the performance of our estimation procedures. Finally, we evaluate evidence for Denmark using our methods and we show that workers are highly sorted and that higher type workers are less productive than lower type workers while employed in lower type jobs.

Suggested Citation

  • Alex Xi He & John Kennes & Daniel le Maire, 2018. "Complementarity and Advantage in the Competing Auctions of Skills," Economics Working Papers 2018-10, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2018-10
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    File URL: ftp://ftp.econ.au.dk/afn/wp/18/wp18_10.pdf
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    References listed on IDEAS

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    1. Jan Eeckhout & Philipp Kircher, 2011. "Identifying Sorting--In Theory," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 872-906.
    2. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    3. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    4. 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, June.
    5. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-1127, September.
    6. John Haltiwanger & Henry Hyatt & Erika McEntarfer, 2018. "Who Moves Up the Job Ladder?," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 301-336.
    7. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 457-475.
    8. Jan Eeckhout & Philipp Kircher, 2010. "Sorting and Decentralized Price Competition," Econometrica, Econometric Society, vol. 78(2), pages 539-574, March.
    9. Rasmus Lentz & Suphanit Piyapromdee & Jean-Marc Robin, 2018. "On Worker and Firm Heterogeneity in Wages and Employment Mobility: Evidence from Danish Register Data," PIER Discussion Papers 91, Puey Ungphakorn Institute for Economic Research, revised Aug 2018.
    10. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    11. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
    12. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
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    Cited by:

    1. John Kennes & Daniel le Maire & Sebastian Roelsgaard, 2018. "Equivalence of Canonical Matching Models," Economics Working Papers 2018-08, Department of Economics and Business Economics, Aarhus University.

    More about this item

    Keywords

    Directed search; sorting; wage dynamics; auctions;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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