DP19255 Labor Market Matching, Wages, and Amenities
This paper develops the nonparametric identification of models with production complementarities, worker-firm specific disutility of labor and search frictions. Mobility in the model is subject to preference shocks, and we assume that firms can write wage contracts. We develop a constructive proof for the nonpara- metric identification of the model primitives from matched employer-employee data. We use the estimated model to decompose the sources of wage dispersion into worker heterogeneity, compensating di↵erentials, and search frictions that generate between-firm and within-firm dispersion. We find that compensating di↵erentials are substantial on average, but the contribution di↵ers greatly be- tween the lowest and highest types of workers. Finally, we use the model to provide an economic interpretation of several empirical regularities.
