High Wage Workers Work for High Wage Firms

Katarína Borovičková, Robert Shimer

NBER Working Paper No. 24074
Issued in November 2017
NBER Program(s):Economic Fluctuations and Growth, Labor Studies

We develop a new approach to measuring the correlation between the types of matched workers and firms. Our approach accurately measures the correlation in data sets with many workers and firms, but a small number of independent observations for each. Using administrative data from Austria, we find that the correlation between worker and firm types lies between 0.4 and 0.6. We use artificial data sets with correlated worker and firm types to show that our estimator is accurate. In contrast, the Abowd, Kramarz and Margolis (1999) fixed effects estimator suggests no correlation between types in our data set. We show both theoretically and empirically that this reflects an incidental parameter problem.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24074

Users who downloaded this paper also downloaded* these:
Stinebrickner, Stinebrickner, and Sullivan w24079 Job Tasks, Time Allocation, and Wages
Bowlus, Bozkurt, Lochner, and Robinson w24069 Wages and Employment: The Canonical Model Revisited
Morrow and Trefler w24078 Endowments, Skill-Biased Technology, and Factor Prices: A Unified Approach to Trade
Flaaen, Shapiro, and Sorkin w24077 Reconsidering the Consequences of Worker Displacements: Firm versus Worker Perspective
DiNardo, Fortin, and Lemieux w5093 Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us