I propose a method to study the role that a labour market matching technology plays in shaping education and wage patterns using cross-sections of matched employer-employee data. In my model, the observed matching of workers to firms is the outcome of a discrete, two-sided matching process where firms with heterogeneous preference rankings over education sequentially choose workers according to an index correlated with worker preference rankings over firms- the index being a simple and flexible way to model frictions . The distribution of education arises in equilibrium from a pre-match Bayesian game: workers, knowing the distribution of worker and firm types, invest in education prior to the matching process. I show how inference is possible in a procedure combining discrete choice methods with simulation-based inference. I estimate the model using data from Canada's Workplace-Employee Survey for the years 1999-2005. My counterfactual analysis of education and wages shows that changes in the matching technology can lead to economically significant equilibrium changes in both inequality and the probability of investing in higher education , and that these effects are more pronounced when worker and firm attributes are complements in the match surplus function.
This paper develops an empirical two-sided matching model with endogenous pre-investment. The model can be used to measure the impact of frictions in labour markets using a single cross-section of matched employer-employee data. The observed matching of workers to firms is the outcome of a discrete, two-sided matching process where firms with heterogeneous preferences over education sequentially choose workers according to an index correlated with worker preferences over firms . The distribution of education arises in equilibrium from a Bayesian game: workers, knowing the distribution of worker and firm types, invest in education prior to the matching process. I propose an inference procedure combining discrete choice methods with simulation. Counterfactual analysis using Canadian data shows that changes in matching frictions can lead to economically significant equilibrium changes in both inequality and the probability of investing in higher education . These effects are more pronounced when worker and firm attributes are complements in the match surplus function.
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I propose a method to study the role that a labour market matching technology plays in shaping education and wage patterns using cross-sections
This paper develops an empirical two-sided matching model with endogenous pre-investment. The model can be used to measure the impact of frictions in labour markets using a single cross-section
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In my model, the
The
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preference rankings
preferences
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preference rankings over firms- the index being a simple and flexible way to model frictions
preferences over firms
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pre-match
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show how inference is possible in a
propose an inference
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simulation-based inference. I estimate the model using data from Canada's Workplace-Employee Survey for the years 1999-2005. My counterfactual analysis of education and wages
simulation. Counterfactual analysis using Canadian data
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the matching technology
matching frictions
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, and that these
. These