Sorting in the Labor Market

Posted: 7 Sep 2018

See all articles by Jan Eeckhout

Jan Eeckhout

University College London - Department of Economics

Date Written: August 2018


This review surveys the literature on sorting in the labor market. There are inherent differences in worker ability and across-firm productivity. Two fundamental questions are whether the exact composition of skills of workers and productivity of firms affects output and how this composition determines the equilibrium allocation of workers within a firm and between firms. There has been a surge of research investigating the causes and consequences of the process of allocation of heterogeneous workers to firms. The focus in this review is on theory that sheds light on open questions in macroeconomics, labor, and industrial organization, with a particular emphasis on the role of firm size. Those models allow us to infer from the observed sorting patterns (who matches with whom) what the underlying technological determinants are and how they have evolved in recent decades. Furthermore, they help us understand the technological origins of important labor market trends, such as the increase in wage inequality and the change in labor market and firm dynamics.

Suggested Citation

Eeckhout, Jan, Sorting in the Labor Market (August 2018). Annual Review of Economics, Vol. 10, pp. 1-29, 2018. Available at SSRN: or

Jan Eeckhout (Contact Author)

University College London - Department of Economics ( email )

30 Gordon Street
London WC1E 6BT, WC1H 0AX
United Kingdom

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