Department of Economics
University of Chicago
1126 East 59th Street
Chicago, IL 60637
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
Institutional Affiliation: University of Chicago
NBER Working Papers and Publications
|June 2020||How Much Should we Trust Estimates of Firm Effects and Worker Sorting?|
with Stéphane Bonhomme, Kerstin Holzheu, Elena Manresa, Magne Mogstad, Bradley Setzler: w27368
Many studies use matched employer-employee data to estimate a statistical model of earnings determination where log-earnings are expressed as the sum of worker effects, firm effects, covariates, and idiosyncratic error terms. Estimates based on this model have produced two influential yet controversial conclusions. First, firm effects typically explain around 20% of the variance of log-earnings, pointing to the importance of firm-specific wage-setting for earnings inequality. Second, the correlation between firm and worker effects is often small and sometimes negative, indicating little if any sorting of high-wage workers to high-paying firms. The objective of this paper is to assess the sensitivity of these conclusions to the biases that arise because of limited mobility of workers across...
|June 2019||Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market|
with Magne Mogstad, Bradley Setzler: w25954
The primary goal of our paper is to quantify the importance of imperfect competition in the U.S. labor market by estimating the size of rents earned by American firms and workers from ongoing employment relationships. To this end, we construct a matched employer-employee panel data set by combining the universe of U.S. business and worker tax records for the period 2001-2015. We describe several important features of the U.S. labor market, including the size of firm-specific wage premiums, the sorting of workers to firms, the production complementarities between high ability workers and productive firms, and the pass-through of firm and market shocks to workers' wages. Guided by these empirical results, we develop, identify and estimate an equilibrium model of the labor market with two-sid...