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Department of Economics Seminar with Professor Jan Stuhler, Universidad Carlos III de Madrid Quasi-Random Matches: Evidence from Dual Labor Markets
Abstract: A fast-growing literature studies how sorting into specific jobs, firms, or locations affects workers. However, a key challenge is the non-random sorting of workers. We propose a novel identification strategy that exploits the timing of worker-firm matching, by interacting high-frequency information on contract durations on the labor supply and transitory fluctuations in job creation on the labor demand side. We apply this method to address a central question in dual labor markets: how do different contract types — fixed-term vs. permanent — affect workers' careers? We find that transitory variation in the opening of permanent contracts is highly predictive of individual contract upgrade probabilities. Securing a permanent position translates into higher employment and earnings growth in the short run. However, despite lasting gains in work experience, the earnings advantages disappear within five years. We argue that the negative effect of open-ended contracts on worker mobility may help to explain these findings.