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

Stephane Bonhomme, Kerstin Holzheu, Thibaut Lamadon, Elena Manresa, Magne Mogstad and Bradley Setzler
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Stephane Bonhomme: University of Chicago
Thibaut Lamadon: University of Chicago, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, IFS - Laboratory of the Institute for Fiscal Studies - Institute for Fiscal Studies
Elena Manresa: NYU - New York University [New York] - NYU - NYU System

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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 US and several European countries while taking advantage of both fixed-effects and random-effects methods for biascorrection. We find that limited mobility bias is severe and that bias-correction is important.

Date: 2023-04
New Economics Papers: this item is included in nep-ecm and nep-ltv
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Published in Journal of Labor Economics, 2023, 41 (2), ⟨10.1086/720009⟩

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Related works:
Journal Article: 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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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03882713

DOI: 10.1086/720009

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