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Match Quality, Contractual Sorting and Wage Cyclicality

Author

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  • Joao Alfredo Galindo da Fonseca

    (University of British Columbia, Vancouver School of Economics)

  • Giovanni Gallipoli

    (University of British Columbia)

  • Yaniv Yedid-Levi

    (University of British Columbia, Vancouver School of Economics)

Abstract

This paper studies the role of match quality for contractual arrangements, wage dynamics and workers' retention. We develop a model in which profit maximizing firms offer a performance-based pay arrangement to retain workers with relatively high match-specific productivity. The key implications of our model hold in data from the NLSY79, where information about job histories and performance pay is available. We relate our findings to the literature on occupation heterogeneity and provide evidence that jobs in "cognitive" occupations have better match quality, exhibit higher prevalence of performance pay, display significant sensitivity of wages to business cycle conditions and last longer.

Suggested Citation

  • Joao Alfredo Galindo da Fonseca & Giovanni Gallipoli & Yaniv Yedid-Levi, 2017. "Match Quality, Contractual Sorting and Wage Cyclicality," Working Papers 2017-076, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2017-076
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    References listed on IDEAS

    as
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    Cited by:

    1. Brant Abbott & Giovanni Gallipoli, 2022. "Permanent‐income inequality," Quantitative Economics, Econometric Society, vol. 13(3), pages 1023-1060, July.
    2. Giovanni Gallipoli & Khalil Esmkhani & Michael Böhm, 2019. "Skill-Biased Firms and the Distribution of Labor Market Returns," 2019 Meeting Papers 1199, Society for Economic Dynamics.

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    More about this item

    Keywords

    match quality; contracts; heterogeneity; occupation; wages; cyclicality;
    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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