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Compensating Wage Differentials in Stable Job Matching Equilibrium

Seungjin Han () and Shintaro Yamaguchi

Department of Economics Working Papers from McMaster University

Abstract: This paper studies implicit pricing of non-wage job characteristics in the labour market using a two-sided matching model. It departs from the previous literature by allowing worker heterogeneity in productivity, which gives rise to a double transaction problem in a hedonic model. Deriving sufficient conditions under which assortative matching is the unique stable job-worker matching, we show that observed wage differentials between jobs reflect not only compensating wage differentials, but also worker productivity gaps between the jobs. We find that the job-worker matching pattern determines the extent to which compensating wage differentials are confounded with the worker productivity gap effect.

Keywords: hedonic model; heterogeneity; two-sided matching; matching pattern; wage differential; equalizing difference; worker productivity (search for similar items in EconPapers)
JEL-codes: C78 J31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2012-01, Revised 2013-02
New Economics Papers: this item is included in nep-gth and nep-lab
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http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2012-01.pdf (application/pdf)

Related works:
Journal Article: Compensating wage differentials in stable job matching equilibrium (2015) Downloads
Working Paper: Compensating Wage Differentials in Stable Job Matching Equilibrium (2013) Downloads
Working Paper: Compensating Wage Differentials in Stable Job Matching Equilibrium (2013) Downloads
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