Earnings Heterogeneity and Job Matching: Evidence from Linked Employer-Employee Data

New Zealand Journal of Employment Relations, Vol. 32, No. 1, pp. 1-16, November 2007

Posted: 6 Jan 2010

See all articles by David C. Maré

David C. Maré

Motu Economic and Public Policy Research Trust; University of Waikato - Economics

Dean Hyslop

Motu Economic and Public Policy Research

Date Written: November 1, 2007

Abstract

This paper uses data from Statistics New Zealand’s linked employer employee database (LEED) over the six year period April 1999-March 2005 to derive and analyse estimates of two-way worker and firm fixed effects components of job earnings rates. The fixed effects estimates reflect the portable earnings premium that each worker receives in whichever firm they work for, and the time-invariant premium that each firm pays to all the workers it employs. We focus on three issues. First, how much of the variation in job earnings rates is attributable to observable worker demographic factors (age and gender), unobserved worker effects and unobserved firm effects? Second, how much compositional change occurred during this period of substantial employment growth? Third, what is the aggregate pattern of sorting of workers and firms across jobs?

Keywords: Earnings, Job Matching, Linked data, Fixed effects, Estimation

JEL Classification: C01, E24, J64

Suggested Citation

Maré, David C. and Hyslop, Dean R., Earnings Heterogeneity and Job Matching: Evidence from Linked Employer-Employee Data (November 1, 2007). New Zealand Journal of Employment Relations, Vol. 32, No. 1, pp. 1-16, November 2007, Available at SSRN: https://ssrn.com/abstract=1531910

David C. Maré

Motu Economic and Public Policy Research Trust ( email )

PO Box 24390
Wellington, 6021
New Zealand
64-4-9394250 (Phone)

HOME PAGE: http://www.motu.org.nz

University of Waikato - Economics

New Zealand

Dean R. Hyslop (Contact Author)

Motu Economic and Public Policy Research ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

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