Sarah Flèche : sarah.fleche[at]univ-amu.fr
Agnès Tomini : agnes.tomini[at]univ-amu.fr
In the context of skill-biased technological change, understanding the nature and the mechanisms through which skills result in improved labor market outcomes is of critical importance. In this paper, we take advantage of three administrative data sources to estimate the labor market returns to skills in the labor market. We first test for non-linearities in these returns and find that the returns to mathematical skills are highly non-linear, with math skill ’superstars’ far outearning other high math scorers. Meanwhile, the returns to language skills are largely flat through the early career. We find that high math-skilled workers not only complete more years of education, but graduate from higher quality universities and earn higher-paying degrees. We further examine the role of firms as a mediator of the returns to skills, a dimension not previously explored in the literature. We find that high-skilled workers match to high-paying firms immediately upon labor market entry. We conduct a decomposition to examine the separate contribution of education and firms in mediating the returns to skills, and find that worker-firm matching explains almost half of the estimated returns.