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Author: Galindo da Fonseca, Joao Alfredo
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1. Galindo da Fonseca, Joao Alfredo
Gallipoli, Giovanni
Yedid-Levi, Yaniv
Match Quality and Contractual Sorting
Labour Economics 66 (October 2020): 101899.
Cohort(s): NLSY79
Publisher: Elsevier
Keyword(s): Job Characteristics; Performance pay; Wage Determination

This paper examines the impact of match-specific heterogeneity on compensation arrangements. In a stylized contractual choice problem we show that employers may have an incentive to offer performance-based contracts when match-specific productivity is high. We test the empirical content of this hypothesis using the NLSY79, which contains information about individual job histories and performance pay. We find that better match quality does affect pay arrangements, employment durations and wage cyclicality. Direct evidence on the accrual of job offers to workers lends support to the hypothesis that employers use performance-related compensation to preserve high-quality matches.
Bibliography Citation
Galindo da Fonseca, Joao Alfredo, Giovanni Gallipoli and Yaniv Yedid-Levi. "Match Quality and Contractual Sorting." Labour Economics 66 (October 2020): 101899.