How Much Should We Trust Estimates of Firm Effects and Worker Sorting?

Stéphane Bonhomme, Kerstin Holzheu, Thibaut Lamadon, Elena Manresa, Magne Mogstad and Bradley Setzler

Journal of Labor Economics, 2023, vol. 41, issue 2, 291 - 322

Abstract: Many studies use matched employer-employee data to estimate a statistical model of earnings determination with worker and firm fixed effects. Estimates based on this model have produced influential yet controversial conclusions. 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 firms. We use employer-employee data from the United States and several European countries while taking advantage of both fixed effects and random effects methods for bias correction. We find that limited mobility bias is severe and that bias correction is important.

Date: 2023
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Related works:
Working Paper: How Much Should we Trust Estimates of Firm Effects and Worker Sorting? (2023)
Working Paper: How Much Should we Trust Estimates of Firm Effects and Worker Sorting? (2023)
Working Paper: How much should we trust estimates of firm effcts and worker sorting? (2021)
Working Paper: How Much Should we Trust Estimates of Firm Effects and Worker Sorting? (2020)
Working Paper: How Much Should we Trust Estimates of Firm Effects and Worker Sorting? (2020)
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