DP10130 Sorting Between and Within Industries: A Testable Model of Assortative Matching

Author(s): John M Abowd, Francis Kramarz, Sebastien Perez-Duarte, Ian M. Schmutte
Publication Date: September 2014
Keyword(s): industries, sorting
JEL(s): J30
Programme Areas: Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10130

We test for sorting of workers between and within industrial sectors in a directed search model with coordination frictions. We fit the model to sector-specific vacancy and output data along with publicly-available statistics that characterize the distribution of worker and employer wage heterogeneity across sectors. Our empirical method is general and can be applied to a broad class of assignment models. The results indicate that industries are the loci of sorting - more productive workers are employed in more productive industries. The evidence confirms assortative matching can be present even when worker and employer components of wage heterogeneity are weakly correlated.