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Supply, Demand, Institutions, and Firms: A Theory of Labor Market Sorting and the Wage Distribution

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  • Daniel Haanwinckel

Abstract

This paper builds a general equilibrium framework with firm and worker heterogeneity, monopsony power, and task-based production to quantify the long-run effects of education, labor demand shocks, and minimum wage. I take it to Brazilian data and find that, between 1998 and 2012: (i) supply and demand shocks increased the sorting of high-wage workers to high-wage firms; (ii) endogenous entry of high-wage firms boosted the effect of rising schooling attainment on mean log wages by 33%; (iii) the impacts of the rising minimum wage on inequality and sorting would have been much stronger without the co-occurring supply and demand shocks.

Suggested Citation

  • Daniel Haanwinckel, 2023. "Supply, Demand, Institutions, and Firms: A Theory of Labor Market Sorting and the Wage Distribution," NBER Working Papers 31318, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31318
    Note: LS
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    Cited by:

    1. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RF Berlin - CReAM Discussion Paper Series 2524, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    2. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RF Berlin - CReAM Discussion Paper Series 2524, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    3. Sergio Pinheiro Firpo & Alysson Lorenzon Portella, 2024. "The labor market in Brazil, 2001–2022," IZA World of Labor, Institute of Labor Economics (IZA), pages 4412-4412, April.
    4. Lagos, Lorenzo, 2024. "Union Bargaining Power and the Amenity-Wage Tradeoff," IZA Discussion Papers 17034, Institute of Labor Economics (IZA).
    5. Daniel Haanwinckel, 2023. "Does regional variation in wage levels identify the effects of a national minimum wage?," Papers 2307.01284, arXiv.org, revised May 2024.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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