Sorting on Skills and Preferences: Tinbergen Meets Sattinger

This paper proposes an assignment model where sorting occurs on attributes that are simultaneously a skill (Sattinger, 1979) and a preference (Tinbergen, 1956). The key feature of this model is that the wage function admits both jobs'' and workers'' attributes as arguments. Since this function is generically nonlinear (Ekeland et al., 2004), even under positive assortative matching, the correlation between the contribution of workers'' attributes to wages and that of jobs'' attributes can vary from -1 to 1 depending on the parameters of the model, i.e. preference, technology and the distribution of both sets of attributes. The paper discusses a closed form solution of the model, presents conditions for the nonparametric identification of compensating wage differentials and nonadditive marginal utility functions using observations from a single hedonic market and proposes anonparametric estimator.