Sorting on Skills and Preferences: Tinbergen Meets Sattinger

This paper proposes an assignment model where sorting occurs on attributes that aresimultaneously a skill (Sattinger, 1979) and a preference (Tinbergen, 1956). The keyfeature of this model is that the wage function admits both jobs’ and workers’ attributesas arguments. Since this function is generically nonlinear (Ekeland et al., 2004), evenunder positive assortative matching, the correlation between the contribution ofworkers’ attributes to wages and that of jobs’ attributes can vary from -1 to 1 dependingon the parameters of the model, i.e. preference, technology and the distribution of bothsets of attributes. The paper discusses a closed form solution of the model, presentsconditions for the nonparametric identification of compensating wage differentials andnonadditive marginal utility functions using observations from a single hedonic marketand proposes a nonparametric estimator.