Location of Repository

A Formal Test of Assortative Matching in the Labor Market

By John Abowd, Francis Kramarz, Sebastien Perez-Duarte and Ian Schmutte

Abstract

We estimate a structural model of job assignment in the presence of coordination frictions due to Shimer (2005). The coordination friction model places restrictions on the joint distribution of worker and firm effects from a linear decomposition of log labor earnings. These restrictions permit estimation of the unobservable ability and productivity differences between workers and their employers as well as the way workers sort into jobs on the basis of these unobservable factors. The estimation is performed on matched employer-employee data from the LEHD program of the U.S. Census Bureau. The estimated correlation between worker and firm effects from the earnings decomposition is close to zero, a finding that is often interpreted as evidence that there is no sorting by comparative advantage in the labor market. Our estimates suggest that his finding actually results from a lack of sufficient heterogeneity in the workforce and available jobs. Workers do sort into jobs on the basis of productive differences, but the effects of sorting are not visible because of the composition of workers and employers.

OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • ftp://ftp2.census.gov/ces/wp/2... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.