Compensating Wage Differentials in Stable Job Matching Equilibrium

26 Pages Posted: 30 Jan 2012 Last revised: 18 Mar 2015

See all articles by Seungjin Han

Seungjin Han

McMaster University - Department of Economics

Shintaro Yamaguchi

University of Tokyo - Graduate School of Economics

Date Written: July 17, 2013

Abstract

Abstract This paper studies implicit pricing of non-wage job characteristics in the labor market using a two-sided matching model. It departs from the previous literature by allowing worker heterogeneity in productivity, which gives rise to a double transaction problem in a hedonic model. Deriving sufficient conditions under which assortative matching is the unique stable job-worker matching, we show that observed wage differentials between jobs reflect not only compensating wage differentials, but also worker productivity gaps between the jobs. We find that the job-worker matching pattern determines the extent to which compensating wage differentials are confounded with the worker productivity gap effect.

Keywords: hedonic model, heterogeneity, two-sided matching, matching pattern, wage differential, equalizing difference, worker productivity

JEL Classification: C78, J31

Suggested Citation

Han, Seungjin and Yamaguchi, Shintaro, Compensating Wage Differentials in Stable Job Matching Equilibrium (July 17, 2013). Available at SSRN: https://ssrn.com/abstract=1994422 or http://dx.doi.org/10.2139/ssrn.1994422

Seungjin Han (Contact Author)

McMaster University - Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

Shintaro Yamaguchi

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

Register to save articles to
your library

Register

Paper statistics

Downloads
144
Abstract Views
1,010
rank
206,687
PlumX Metrics