Discussion paper

DP17645 Matching Workers’ Skills and Firms’ Technologies: From Bundling to Unbundling

How are workers matched to firms when their skills are multidimensional and firms differ in how they value each skill dimension for their production? When workers’ skills cannot be unpacked and sold separately on skill-specific markets, the implicit price of each skill can vary across firms. The wage function is shown to be log-additive in worker quality and a firm-specific effect that reflects the firm’s aggregate skill-mix and equilibrium matching. When individual skills can be unpacked or purchased on markets thanks to new technologies and increasing access to outsourcing, firms reinforce their hires of skills in which they have a comparative advantage yielding a more polarized matching equilibrium. Generalist workers – endowed with a balanced set of skills – are shown to benefit whereas specialists are negatively affected by markets opening. We also examine the case when workers or firms pay a fee to an unbundling platform. We discuss the empirical content of our theory and supportive evidence which uses Swedish data on workers’ skills and their employing firms.

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Citation

Chone, P and F Kramarz (eds) (2022), “DP17645 Matching Workers’ Skills and Firms’ Technologies: From Bundling to Unbundling”, CEPR Press Discussion Paper No. 17645. https://cepr.org/publications/dp17645