REINTERPRETING INDUSTRY PREMIUMS - MATCH-SPECIFIC PRODUCTIVITY

This article builds a simple model of worker sorting and match-specifi c productivity to explain interindustry wage differentials. High-skill ed workers sort themselves into the industries offering more jobs that are better matched to them, and those industries pay higher wages (on average). In job transition following an exogenous job separation, th e likelihood of industry switching is higher among marginal workers -l ow- (high-) skilled workers in high- (low-)wage industry. Empirical fi ndings from a sample of exogenous job separations created from the Dis placed Worker Surveys are generally consistent with the implications o f the model.