← Search

How Much Should We Trust Estimates of Firm Effects and Worker Sorting?

Stéphane Bonhomme¹; Kerstin Holzheu²; Thibaut Lamadon^3,4,1,5; Elena Manresa⁶; Magne Mogstad^3,4,1; Bradley Setzler⁷

¹ University of Chicago · ² Institut d'Etudes Politiques de Paris · ³ National Bureau of Economic Research · ⁴ Institute for Fiscal Studies · ⁵ Institute for Evaluation of Labour Market and Education Policy · ⁶ New York University · ⁷ Pennsylvania State University

Many studies use matched employer-employee data to estimate a statistical model of earnings determination with worker and firm fixed effects. Estimates based on this model have produced influential yet controversial conclusions. The objective of this paper is to assess the sensitivity of these conclusions to the biases that arise because of limited mobility of workers across firms. We use employer-employee data from the United States and several European countries while taking advantage of both fixed effects and random effects methods for bias correction. We find that limited mobility bias is severe and that bias correction is important.

DOI

10.1086/720009

Volume

41 (2)

Pages

291-322

Language

en

Export

BibTeX

Sources

openalex crossref