The Changing Value of Employment
Paper joint with Davide Alonzo
Abstract:
Do workers derive different returns from similar jobs? Are earnings informative about changes in overall returns from work? We estimate the value of worker-occupation matches in an equilibrium model that distinguishes between wages and latent returns. We define a measure of employment rents that has three properties: (i) it reflects both wages and unobserved match values; (ii) it delivers a monetary metric for compensating differentials; (iii) it illustrates how the marginal workers within a match affect the rents of others. We show that earnings data reliably approximate the evolution of average rents between 1980 and 2018 despite differences in unobserved match values. The results highlight a dichotomy: while the existence of rents is due to latent values, their evolution is driven by productivity and technology.