Composite Sorting

Job Boerma, Aleh Tsyvinski, Ruodu Wang and Zhenyuan Zhang

Papers from arXiv.org

Abstract: This paper introduces a labor market model with concave mismatch costs, which arise when firms mitigate the cost of mismatch. Concave mismatch costs imply that output is neither supermodular nor submodular. We characterize sorting, wages, and comparative statics and show these substantively differ from traditional assignment models. Under composite sorting: (1) distinct worker types work in the same occupation, and (2) a worker type is simultaneously part of both positive and negative sorting. Quantitatively, our model can generate sizable earnings dispersion and the decomposition of earnings dispersion between and within occupations, as well as their changes over time.

Date: 2023-03, Revised 2024-09
New Economics Papers: this item is included in nep-des
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