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Wage Markdowns and the Sorting of Workers to Firms when Skills are Bundled

Author

Listed:
  • Choné, Philippe
  • Kramarz, Francis
  • Nordström Skans, Oskar

Abstract

We study a competitive labor market where heterogeneous workers supply multidimensional skills to heterogeneous firms. Firms produce output by aggregating employees' skill bundles, using them as inputs in a concave production function. A single friction—the bundling of workers' skills—generates an equilibrium with workers-to-firms sorting based on comparative advantage, where each firm has a unique optimal size, and where the wage schedule is convex. Skill prices vary across firms despite competitive wage-setting, with a markdown for workers endowed with balanced skills. We illustrate the empirical relevance of key assumptions and predictions using matched worker-firm data on workers' skill profiles.

Suggested Citation

  • Choné, Philippe & Kramarz, Francis & Nordström Skans, Oskar, 2025. "Wage Markdowns and the Sorting of Workers to Firms when Skills are Bundled," CEPR Discussion Papers 20618, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20618
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    File URL: https://cepr.org/publications/DP20618
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    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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