High Wage Workers Match with High Wage Firms: Clear Evidence of the Effects of Limited Mobility Bias

13 Pages Posted: 23 Jun 2012

See all articles by Martyn J. Andrews

Martyn J. Andrews

University of Manchester - School of Social Sciences

Leonard Gill

affiliation not provided to SSRN

Thorsten Schank

University of Erlangen-Nuremberg

Richard Upward

University of Nottingham - School of Economics

Abstract

Positive assortative matching implies that high productivity workers and firms match together. However, there is almost no evidence of a positive correlation between the worker and firm contributions in two-way fixed-effects wage equations. This could be the result of a bias caused by standard estimation error. Using German social security records we show that the effect of this bias is substantial in samples with limited inter-firm movement. The correlation between worker and firm contributions to wage equations is unambiguously positive.

Keywords: linked employer-employee panel data, fixed effects, limited mobility bias

JEL Classification: J20, J30, C23

Suggested Citation

Andrews, Martyn J. and Gill, Leonard and Schank, Thorsten and Upward, Richard, High Wage Workers Match with High Wage Firms: Clear Evidence of the Effects of Limited Mobility Bias. Available at SSRN: https://ssrn.com/abstract=2089711 or http://dx.doi.org/10.2139/ssrn.2089711

Martyn J. Andrews (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom
0161 275-4874 (Phone)

Leonard Gill

affiliation not provided to SSRN

No Address Available

Thorsten Schank

University of Erlangen-Nuremberg ( email )

SchloƟplatz 4
Erlangen, DE Bavaria 91054
Germany

Richard Upward

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 951 5151 (Phone)
+44 115 951 4159 (Fax)

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