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Matching, Sorting, and Wages

Author

Listed:
  • Thibaut Lamadon

    (University of Chicago)

  • Costas Meghir

    (Yale University)

  • Jean Marc Robin

    (Sciences Po)

  • Jeremy Lise

    (University of Minnesota)

Abstract

This paper the non-parametric identification of models with production complementarities and search frictions. We develop a model with two sided unobserved heterogeneity, mobility costs, on-the-job search and vacancy cre- ation. The mobility cost is borne by the worker. The assumption here is that the worker pays the moving cost and the firm compensates her through a higher wage. Essentially we assume that firms can make wage payments, but not lump sum payments. The mobility cost is introduced to provide a structural source of wage randomness given worker and firm heterogeneity. We develop a constructive proof for the non-parametric identification of the production function from matched employer-employee data. We evaluate the properties of the associated estimator with a Monte-Carlo simulation. We estimate the model on the matched employer-employee data from Sweden to estimate the complementarity between unobserved worker and firm hetero- geneity, decompose the sources of income inequality and quantify the output loss due to search friction

Suggested Citation

  • Thibaut Lamadon & Costas Meghir & Jean Marc Robin & Jeremy Lise, 2018. "Matching, Sorting, and Wages," 2018 Meeting Papers 568, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:568
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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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