Firm wage differentials and labor market sorting: Reconciling theory and evidence

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

Why do firms pay different wages? Empirical evidence suggests the presence of substantial differences in firm pay controlling for worker skill. Moreover, these differences are uncorrelated with skills, indicating the absence of sorting. I show that the face value interpretation is inconsistent with evidence on coworker segregation. I interpret the evidence by applying a sorting model and show that the correlation is biased. I identify nonmonotonicities in wages as the reason for this bias and show that a measure of worker-coworker sorting is more accurate. By calibrating the model to US data, I confirm that the model matches many job market characteristics.
Original languageEnglish
Pages (from-to)313-346
JournalJournal of Political Economy
Volume126
Issue number1
Early online date11 Jan 2018
DOIs
Publication statusPublished - Feb 2018

Fingerprint

Dive into the research topics of 'Firm wage differentials and labor market sorting: Reconciling theory and evidence'. Together they form a unique fingerprint.

Cite this