Identifying Sorting − In Data∗
Marcus Hagedorn†
University of Cologne
Tzuo Hann Law
‡
University of Pennsylvania
Iourii Manovskii§
University of Pennsylvania
February 19, 2012
Abstract
We show theoretically how to identify, using wage data alone, whether assortative matching
between workers and firms is positive or negative. The results of a Monte Carlo study of
calibrated models featuring positive and negative sorting illustrate that the method performs
well given the limitations (on sample size, frequency of labor market transitions, etc) of the
commonly used matched worker-firm data sets. We apply the method to a large matched
worker-firm data set from Germany.
∗
†
Support from the National Science Foundation Grant No. SES-0617876 is gratefully acknowledged.
University of Cologne, Center for Macroeconomic Research (CMR), Albertus-Magnus-Platz, 50923 Köln, Ger-
many Email: marcus.hagedorn@wiso.uni-koeln.de.
‡
Department of Economics, University of Pennsylvania, 160 McNeil Building, 3718 Locust Walk, Philadelphia,
PA, 19104-6297 USA. E-mail: tzuolaw@sas.upenn.edu.
§
Department of Economics, University of Pennsylvania, 160 McNeil Building, 3718 Locust Walk, Philadelphia,
PA, 19104-6297 USA. E-mail: manovski@econ.upenn.edu.