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The nonlinear nature of labor market sorting: explaining wage inequalities between and within sociodemographic groups
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DOI：10.1093/sf/soag067.png)
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Abstract
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Sociodemographic groups with higher average wages also exhibit higher internal wage dispersion, partly explaining the overrepresentation of older, educated men in top wage percentiles. Despite being widely documented, the origins of this relationship remain poorly understood. This article proposes an explanation rooted in sorting—the tendency for workers who already command higher wages to end up in the organizations and occupations that pay the most. I argue that sorting is not merely positive but also nonlinear: its strength intensifies at higher wage levels. Because higher-wage groups experience stronger sorting, their internal wage dispersion is inflated, which contributes to the relationship between group mean wages and internal dispersion. Using French administrative data, I employ variance decompositions and simulations to quantify these effects. I find that nonlinear sorting accounts for 13% of the covariance between micro-group mean wages and internal dispersion, and for 25% of the variance in wage dispersion across groups. Simulations combined with variance function regression identify education and age as the primary dimensions along which nonlinear sorting operates. In addition, the study confirms and extends prior findings on positive sorting, showing that it accounts for 38% of between-group inequality.
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