Title: Within-Job Wage Inequality: Performance Pay and Skill Match
Time: 10:00am-11:30am, Thursday, 3 March 2022
Venue: Conference Room 119, Wenqin Building
Moderator: Prof. Lu Yuanping
Presenter: Tang Rongsheng
Assistant Professor, Institute for Advanced Research, Shanghai University of Finance and Economics, PhD in Economics, Washington University in St. Louis
Abstract:
Over recent decades, we find about 80% of widening residual wage inequality to be within jobs(industry-occupation pairs). To explore the underlying drivers, we incorporate into a sorting equilibrium framework two extensive margin channels-across-job sorting and within-job selection of a performance-pay position and an intensive margin chanel via skill match quality in addition to general job productivity. We show that equilibrium sorting is positive assortative both within jobs and across jobs. In such a sorting equilibrium, these channels interact with each other, leading to rich comparative static results on within-job wage dispersion. To quantify the role played by these factors, we calibrate the model to the US economy in 1990 and 2000. Our model almost perfectly fits the within-job wage inequality data on 23 of 25 broadly defined jobs, in which match quality and equilibrium job sorting account for more than 90% of the overall rising within-job wage dispersion from 1990 to 2000. We find that match quality and job sorting are particularly important in jobs wtih rising average wages and expansionary employment. While the performance-pay incidence makes a modest contrubution to the aggregate outcome, its role in the Trade industry and in the Clerical occupation is more noticeable, whereas general job productivity is inconsequential throughout.