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High Wage Workers Match with High Wage Firms: Clear Evidence of the Effects of Limited Mobility Bias

Author

Listed:
  • Andrews, Martyn J.

    () (University of Manchester)

  • Gill, Leonard

    () (University of Manchester)

  • Schank, Thorsten

    () (University of Mainz)

  • Upward, Richard

    () (University of Nottingham)

Abstract

Positive assortative matching implies that high productivity workers and firms match together. However, there is almost no evidence of a positive correlation between the worker and firm contributions in two-way fixed-effects wage equations. This could be the result of a bias caused by standard estimation error. Using German social security records we show that the effect of this bias is substantial in samples with limited inter-firm movement. The correlation between worker and firm contributions to wage equations is unambiguously positive.

Suggested Citation

  • Andrews, Martyn J. & Gill, Leonard & Schank, Thorsten & Upward, Richard, 2012. "High Wage Workers Match with High Wage Firms: Clear Evidence of the Effects of Limited Mobility Bias," IZA Discussion Papers 6662, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6662
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    References listed on IDEAS

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    Cited by:

    1. Dobbelaere, Sabien & Mairesse, Jacques, 2018. "Comparing micro-evidence on rent sharing from two different econometric models," Labour Economics, Elsevier, vol. 52(C), pages 18-26.
    2. repec:bla:buecrs:v:70:y:2018:i:4:p:459-482 is not listed on IDEAS
    3. repec:bla:buecrs:v:71:y:2019:i:2:p:195-208 is not listed on IDEAS
    4. Philipp Ehrl, 2014. "High-wage workers and high-productivity firms - a regional view on matching in Germany," Working Papers 149, Bavarian Graduate Program in Economics (BGPE).
    5. Daniel Schaefer & Carl Singleton, 2017. "Recent Changes in British Wage Inequality: Evidence from Firms and Occupations," 2017 Meeting Papers 459, Society for Economic Dynamics.
    6. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
    7. Jewell, Sarah & Razzu, Giovanni & Singleton, Carl, 2018. "Who works for whom and the UK gender pay gap?," MPRA Paper 87191, University Library of Munich, Germany.
    8. Ainara González de San Román & Yolanda F. Rebollo‐Sanz, 2018. "An Estimation Of Worker And Firm Effects With Censored Data," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 459-482, October.
    9. Bosquet, Clément & Combes, Pierre-Philippe, 2017. "Sorting and agglomeration economies in French economics departments," Journal of Urban Economics, Elsevier, vol. 101(C), pages 27-44.
    10. repec:eee:wdevel:v:112:y:2018:i:c:p:46-58 is not listed on IDEAS
    11. Bosquet, Clément & Combes, Pierre-Philippe, 2017. "Sorting and agglomeration economies in French economics departments," Journal of Urban Economics, Elsevier, vol. 101(C), pages 27-44.
    12. Koen Jochmans & Martin Weidner, 2019. "Fixed‐Effect Regressions on Network Data," Econometrica, Econometric Society, vol. 87(5), pages 1543-1560, September.
    13. Rachel Scarfe & Carl Singleton & Paul Telemo, 2019. "Do high wage footballers play for high wage teams? The case of Major League Soccer," Economics & Management Discussion Papers em-dp2019-04, Henley Business School, Reading University.
    14. Green, Colin & Heywood, John S. & Theodoropoulos, Nikolaos, 2017. "Employer Size and Supervisor Earnings: Evidence from Britain," GLO Discussion Paper Series 136, Global Labor Organization (GLO).
    15. Dupuy, Arnaud & Galichon, Alfred, 2017. "A Note on the Estimation of Job Amenities and Labor Productivity," IZA Discussion Papers 10900, Institute of Labor Economics (IZA).
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    17. repec:eee:labeco:v:54:y:2018:i:c:p:47-60 is not listed on IDEAS
    18. Bødker, Jonas Ehn & Maibom, Jonas & Vejlin, Rune Majlund, 2018. "Decomposing the Exporter Wage Gap: Selection or Differential Returns?," IZA Discussion Papers 11998, Institute of Labor Economics (IZA).
    19. Kory Kantenga, 2016. "Sorting and Wage Inequality," 2016 Meeting Papers 660, Society for Economic Dynamics.
    20. repec:eme:ijmpps:ijm-04-2016-0082 is not listed on IDEAS
    21. Yolanda F. Rebollo-Sanz, 2017. "Decomposing the structure of wages into firm and worker effects: Some insights from a high unemployment economy," International Journal of Manpower, Emerald Group Publishing, vol. 38(5), pages 765-787, August.

    More about this item

    Keywords

    fixed effects; linked employer-employee panel data; limited mobility bias;

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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