Coen N. Teulings
Abstract
This paper considers a generalization of a model of the assignment of heterogeneous workers to heterogeneous jobs, by allowing for imperfect substitution between worker types within a job type. The relevant first order condition is a simple extension of the condition for the case with perfect substitution. The generalized model is used to derive formulas for the elasticities of substitution and complementarity between worker types. Estimation results for the US economy are presented· A new approach to self selection in hedonic pricing models is proposed for the purpose. Simulation results show larger elasticities of complementarity for the lower tier of the labor market than usually reported.