Review of Economic Studies Vol. 91 No. 6 2024
Outside Options in the Labour Market
Abstract
This paper develops a method to estimate workers’ outside employment opportunities. We outline a matching model with two-sided heterogeneity, from which we derive a sufficient statistic, the “outside options index” (OOI), for the effect of outside options on earnings, holding worker productivity constant. The OOI uses the cross-sectional concentration of similar workers across job types to quantify workers’ outside options as a function of workers’ commuting costs, preferences, and skills. Using German micro-data, we find that differences in options explain 20% of the gender earnings gap, and that gender gaps in options are mostly due to differences in the implicit costs of commuting and moving.
- DOI
- 10.1093/restud/rdae006
- Volume
- 91
- Issue
- 6
- Pages
- 3286-3315
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref