Richard Duhautois

Decomposing the relationship between wage and churning

Purpose - – Applied research shows higher wages are associated with lower mobility at the establishment level. A usual interpretation is that high pay decreases labour turnover. The purpose of this paper is to test if such relationship holds for every type of worker in every type of firm. Design/methodology/approach - – The analysis is based on a linked employer-employee panel dataset covering the French private sector from 2002 to 2005. The authors compute establishment wage effects and use them as explanatory variables in labour mobility equations (for churning rate and quit rate). Using spline regression models enables to investigate for potential non-linearities. Findings - – The authors show that the relationship between churning rate and wage is non-linear and has the shape of an inverted Practical implications - – A possible interpretation of our results is that paying higher wages may be an effective stabilizing tool especially for employers in small establishments and when starting wages are relatively low. Originality/value - – The paper is the first to decompose the relationship between wage and mobility. It shows the relationship differs across establishment size and is not linear. The paper also shows quits play a role in this relationship.

Assortative Matching Using Soccer Data

In labor economics, the theory of assortative matching focuses on the mutual selection of workers and firms. Empirical studies using Abowd, Kramarz, and Margolis’ methodology (an estimation of a two-way fixed effects (FE) model) do not provide clear evidence of the existence of assortative matching between workers and firms, that is, there is no clear evidence that good employees work in good firms. In fact, negative or very small correlations are found in the literature using this approach. Andrews, Gill, Shank, and Upward suggest that positive assortative matching has not been observed in the empirical literature because of a limited mobility bias. This article uses Italian soccer championship data to test positive assortative matching. Because job turnover is significantly high in professional soccer, we use numerous movers to detect sorting. Our results indicate that estimating a standard Mincerian wage equation with numerous movers enables us to find a positive correlation between players’ and firms’ FE, meaning that good players tend to move to good teams. This suggests that superstar effects are at work as the unobserved component of the player FE is far more correlated with the wage than the observed component.