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Composite Sorting

Author

Listed:
  • Job Boerma
  • Aleh Tsyvinski
  • Ruodu Wang
  • Zhenyuan Zhang

Abstract

This paper introduces a labor market model with concave mismatch costs, which arise when firms mitigate the cost of mismatch. Concave mismatch costs imply that output is neither supermodular nor submodular. We characterize sorting, wages, and comparative statics and show these substantively differ from traditional assignment models. Under composite sorting: (1) distinct worker types work in the same occupation, and (2) a worker type is simultaneously part of both positive and negative sorting. Quantitatively, our model can generate sizable earnings dispersion and the decomposition of earnings dispersion between and within occupations, as well as their changes over time.

Suggested Citation

  • Job Boerma & Aleh Tsyvinski & Ruodu Wang & Zhenyuan Zhang, 2023. "Composite Sorting," Papers 2303.06701, arXiv.org, revised Sep 2024.
    • Handle: RePEc:arx:papers:2303.06701
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    References listed on IDEAS

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