Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 2015:4: Firms and skills: the evolution of worker sorting

Christina HÃ¥kanson (), Erik Lindqvist () and Jonas Vlachos ()
Additional contact information
Christina HÃ¥kanson: Sveriges Riksbank, Postal: 103 37 Stockholm, Sweden
Erik Lindqvist: Stockholm School of Economics, and IFN., Postal: Department of Economics, Stockholm School of Economics, S-113 63 Stockholm, Sweden
Jonas Vlachos: Stockholm University and IFN., Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden

Abstract: We document a significant increase in the sorting of workers by cognitive and non- cognitive skills across Swedish firms between 1986 and 2008. The weight of the evidence suggests that the increase in sorting is due to stronger complementarities between worker skills and technology. In particular, a large fraction of the increase can be explained by the expansion of the ICT sector and a reallocation of engineers across firms. We also find evidence of increasing assortative matching, in the sense that workers who are particularly skilled in their respective educational groups are more likely to work in the same firms. Changes in sorting pattens and skill gradients can account for a about half of the increase in between-firm wage dispersion.

Keywords: Skill sorting; skilled-biased technological change; outsourcing; globalization; cognitive skills; non-cognitive skills; personality; employer-employee matched data.

JEL-codes: J24; J62; L21; O33

81 pages, May 26, 2015

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