Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295961 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 16938
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Are labor markets in higher-income countries more meritocratic, in the sense that worker-job matching is based on skills rather than idiosyncratic attributes unrelated to productivity? If so, why? And what are the aggregate consequences? Using internationally comparable data on worker skills and job skill requirements of over 120,000 individuals across 28 countries, we document that workers' skills better match their jobs' skill requirements in higher-income countries. To quantify the role of worker-job matching in development accounting, we build an equilibrium matching model that allows for cross-country differences in three fundamentals: (i) the endowments of multidimensional worker skills and job skill requirements, which determine match feasibility; (ii) technology, which determines the returns to matching; and (iii) idiosyncratic matching frictions, which capture the role of nonproductive worker and job traits in the matching process. The estimated model delivers two key insights. First, improvements in worker-job matching due to reduced matching frictions account for only a small share of cross-country income differences. Second, however, improved worker-job matching is crucial for unlocking the gains from economic development generated by adopting frontier endowments and technology.
Subjects: 
skills
sorting
matching
multidimensional heterogeneity
development accounting
wage inequality
gender
migration
JEL: 
C78
E24
J24
J31
O11
O12
Document Type: 
Working Paper

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