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Match quality and contractual sorting

Author

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  • Galindo da Fonseca, João Alfredo
  • Gallipoli, Giovanni
  • Yedid-Levi, Yaniv

Abstract

This paper examines the impact of match-specific heterogeneity on compensation arrangements. In a stylized contractual choice problem we show that employers may have an incentive to offer performance-based contracts when match-specific productivity is high. We test the empirical content of this hypothesis using the NLSY79, which contains information about individual job histories and performance pay. We find that better match quality does affect pay arrangements, employment durations and wage cyclicality. Direct evidence on the accrual of job offers to workers lends support to the hypothesis that employers use performance-related compensation to preserve high-quality matches.

Suggested Citation

  • Galindo da Fonseca, João Alfredo & Gallipoli, Giovanni & Yedid-Levi, Yaniv, 2020. "Match quality and contractual sorting," Labour Economics, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:labeco:v:66:y:2020:i:c:s0927537120301032
    DOI: 10.1016/j.labeco.2020.101899
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    More about this item

    Keywords

    Match quality; Contracts; Heterogeneity; Wages;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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