No. 1/2020: Assortative labor matching, city size, and the education level of workers

Abstract

Recent research shows that thicker labor markets display better assortative matching. Our contribution addresses identification challenges and heterogeneity of effects, in particular with respect to education. Using a rich administrative worker-firm dataset for Norway, labor market size is shown to be of relevance for assortative matching mainly for the college educated. Among these, the pattern is most pronounced for workers of intermediate ages, with education related to business and administration, men, and service sector workers. Results are robust to instrumentation of population size using historical mines and sample adjustment to mitigate limited mobility bias.