Reinterpreting Industry Premiums: Match-Specific Productivity

Dae Il Kim

Journal of Labor Economics, 1998, vol. 16, issue 3, 479-504

Abstract: This article builds a simple model of worker sorting and match-specific productivity to explain interindustry wage differentials. High-skilled workers sort themselves into the industries offering more jobs that are better matched to them and those industries pay higher wages (on average). In job transition following an exogenous job separation, the likelihood of industry switching is higher among marginal workers--low- (high-)skilled workers in high- (low-)wage industry. Empirical findings from a sample of exogenous job separations created from the Displaced Worker Surveys are generally consistent with the implications of the model. Copyright 1998 by University of Chicago Press.

Date: 1998
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