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Tuesday, March 20, 2018 at 11:40am to 1:10pm
Uris Hall, 498
Rasmus Lentz - University of Wisconsin
On Worker and Firm Heterogeneity in Wages and Employment Mobility: Evidence from Danish Register Data (joint w/Suphanit Piyapromdee & Jean-Marc Robin)
Abstract: In this paper, we propose an estimation method that allows for unrestricted interactions between worker and firm unobserved characteristics in both wages and the mobility patterns. Related to Bonhomme, Lamadon, and Manresa (2017), our method identifies double sided unobserved heterogeneity through an application of the EM-algorithm where the firm classification is repeatedly updated so as to improve on the likelihood function. In Monte Carlo simulations we demonstrate that the cyclic updating of the firm classification provides a significant performance improvement. Firm classification is a result of both wage and mobility patterns in the data. We estimate the model on Danish matched employer-employee data for the period 1985-2013. The estimation includes gender, education, age and time controls. We find an increased sorting pattern over time, although overall sorting is modest.