Wage Markdowns and the Sorting of Workers to Firms when Skills are Bundled

Choné, Philippe, Francis Kramarz and Nordström Skans, Oskar

No 20618, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study a competitive labor market where heterogeneous workers supply multidimensional skills to heterogeneous firms. Firms produce output by aggregating employees' skill bundles, using them as inputs in a concave production function. A single friction—the bundling of workers' skills—generates an equilibrium with workers-to-firms sorting based on comparative advantage, where each firm has a unique optimal size, and where the wage schedule is convex. Skill prices vary across firms despite competitive wage-setting, with a markdown for workers endowed with balanced skills. We illustrate the empirical relevance of key assumptions and predictions using matched worker-firm data on workers' skill profiles.

JEL-codes: D20 D40 D51 J20 J24 J30 (search for similar items in EconPapers)
Date: 2025-09
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