Match Quality, Contractual Sorting and Wage Cyclicality

We examine whether match-specific quality has any effect on the type of contractual arrangements and on wage dynamics.

João Alfredo Galindo da Fonseca and Yaniv Yedid-Levi

This paper studies the role of match quality for contractual arrangements, wage dynamics and workers’ retention. We develop a model in which profit maximizing firms offer a performance-based pay arrangement to retain workers with relatively high match-specific productivity. Key implications of our model hold in data from the NLSY79, where information about job histories and performance pay is available, suggesting that match quality affects both pay arrangements and employment durations. Contractual sorting appears to play an important role in determining the cyclicality of wages.



  title={Match Quality, Contractual Sorting and Wage Cyclicality},
  author={Galindo da Fonseca, Joao and Gallipoli, Giovanni and Yedid-Levi, Yaniv},
  note = {Working Paper},
  institution={UBC, Vancouver School of Economics}