Match quality and contractual sorting

Joao Galindo da Fonseca, Giovanni Gallipoli () and Yaniv Yedid-Levi

Labour Economics, 2020, vol. 66, issue C

Abstract: This paper examines the impact of match-specific heterogeneity on compensation arrangements. In a stylized contractual choice problem we show that employers may have an incentive to offer performance-based contracts when match-specific productivity is high. We test the empirical content of this hypothesis using the NLSY79, which contains information about individual job histories and performance pay. We find that better match quality does affect pay arrangements, employment durations and wage cyclicality. Direct evidence on the accrual of job offers to workers lends support to the hypothesis that employers use performance-related compensation to preserve high-quality matches.

Keywords: Match quality; Contracts; Heterogeneity; Wages (search for similar items in EconPapers)
JEL-codes: E24 J33 J41 M52 M55 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:66:y:2020:i:c:s0927537120301032

DOI: 10.1016/j.labeco.2020.101899

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