Discussion paper

DP18922 Matching Workers' Skills and Firms' Technologies Part I: Bundling

How are workers matched to firms and compensated when their skills are multidimensional, cannot be unpacked -- are bundled -- and when firms a) differ in how they value each skill dimension in their production technology and differ in their productivity; b) aggregate their workers' skills to produce; c) and optimally choose their size? Because workers' skills cannot be sold separately on skill-specific markets, the implicit price of each skill is shown to vary across firms, workers' sorting into firms is shown to depend on their comparative advantage, and firms' (unique) size is shown to increase in productivity. The (unique) equilibrium wage function is shown to be log-additive in worker quality and a worker-to-firm sorting effect that may reflect the firm's productivity. We also examine the empirical content of our theory. In a companion paper, Choné, Gozlan, and Kramarz, 2024, we examine unbundling i.e. when individuals choose the amount of skills supplied to their firms or when skills can be unpacked and traded on markets.


Choné, P and F Kramarz (2024), ‘DP18922 Matching Workers' Skills and Firms' Technologies Part I: Bundling‘, CEPR Discussion Paper No. 18922. CEPR Press, Paris & London. https://cepr.org/publications/dp18922