Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2007:30: An empirical assessment of assortative matching in the labor market

Rute Mendes , Gerard J van den Berg () and Maarten Lindeboom
Additional contact information
Rute Mendes: Free University Amsterdam, Department of Economics, Postal: De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands
Gerard J van den Berg: Free University Amsterdam, Department of Economics, Postal: De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands
Maarten Lindeboom: Free University Amsterdam, Department of Economics, Postal: De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands

Abstract: In labor markets with worker and firm heterogeneity, the matching between firms and workers may be assortative, meaning that the most productive workers and firms team up. We investigate this with longitudinal population-wide matched employer-emplyee data from Portugal. Using dynamic panel data methods, we quantify a firm-specific productivity term for each firm, and we relate this to the skill distribution of workers in the firm. We find that there is positive assortative matching, in particular among long-lived firms. Using skill-specific estimates of an index of search frictions, we find that the results can only to a small extent be explained by heterogeneity of search frictions across worker skill groups.

Keywords: Positive assortative matching; matched employer-employee data; productivity; skill; unobserved heterogeneity; sorting; fixed effects

JEL-codes: D24; J21; J24; J63

30 pages, November 30, 2007

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