Supply and Demand in a Two-Sector Matching Model   [PDF

(Job Market Paper)

This paper merges a model of workers’ self-selection (across sectors) with an assignment model (within sectors). I provide comparative statics results for changes in the production function, the distribution of skill and the distribution of firms’ productivity. Any manufacturing-specific technological improvement that favors high skilled workers results in better sorting into manufacturing. If unemployment is positive, this raises wage inequality in both industries. Perverse output effects are possible: manufacturing might contract if the technological improvement favors low skilled workers. Finally, in the symmetric case wages become more polarized if both sectors start using more similar skills in the production process.

On the Importance of Social Status for Labour Markets [PDF]

Academia pays lower and less differentiated wages than other professional occupations and yet attracts large numbers of highly talented workers. I show that social status can solve this puzzle only if academics care both about occupational prestige and the position within their occupation (local status). If incomes are taxed at a sufficiently high rate, social status can induce arbitrary combinations of academia’s size and workforce quality even if academics’ taste for status is low. Finally, if there are further distortions present, social status concerns can enable the design of occupation-independent tax schedules that restore efficiency.

Occupational Sorting and the Structure of Status [PDF]

This paper investigates the impact of social status on occupational sorting in a two-sector matching framework. Social status depends both on occupational prestige and within-sector rank (local status). I show that the weights with which these components enter — the structure of status — play a crucial for equilibrium sorting and argue that most likely these weights differ across occupations. The greater the relative importance of ranks in a sector, the better workers does the sector attract on average, which has implications for payoffs, wage levels and inequality, and profits. Although the equilibrium is typically inefficient, this is caused by the externalities caused by local status and occupational prestige specifically, rather than by status concerns per se.

Mexican Immigration to the US: Selection, Sorting and Matching  (with Michał Burzyński) [slides]

draft available on request

We propose a micro-founded theory of international migration, in which continuously heterogeneous individuals endogenously sort into two labor markets and match with productivity-differentiated firms. Our model allows for investigating rich economic implications of migration policies, including wage, entry/exit of firms, market size and fiscal effects of migration. In a calibrated numerical exercise focused on Mexican migration to the US we find that imposing a prohibitive migration cost increases the wages of 62% of US natives — the less skilled ones. The main force that shapes this result hinges on the negative selection of Mexicans and their severe downgrading in comparison to US citizens.