Education Expansion, Sorting, and the Decreasing Education Wage Premium
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A/EC202 Staff Room
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Guest speaker: Pauline Corblet (Luxembourg)
Abstract: This paper studies the interplay between worker supply and firm demand, and their effect on sorting and wages in the labor market. I build a one-to-many matching model that incorporates multidimensional worker and firm types, worker preferences, and workers’ substitution in firms’ productivity. Using tools from the optimal trans- port literature, I solve the model and structurally estimate it on Portuguese matched employer-employee data. The Portuguese labor market is characterized by an increase in the relative supply of high school graduates, an growing imbalance in the distribution of high school graduates and non-graduates across industries, and a decreasing high school wage premium between 1987 and 2017. Counterfactual exercises show that both changes in worker preferences and the increasing relative productivity of high school graduates over non-graduates partially offset the decreasing high school wage premium, but do not fully compensate for high school graduates’ rise in relative supply.
Host: Simon Weber (York)