The Distribution of Labor Market Surplus

We suggest an approach to characterize the surplus generated by different worker-occupation matches and the distribution of both pecuniary and non-pecuniary returns. Since pecuniary and non-pecuniary components are bundled within each occupation, rents arise in equilibrium. We show that rents have grown significantly in the U.S. labor market after 1980. Using variation in match-specific surplus, we estimate the substitutability of worker-occupation inputs in production and find that the evolution of wages is largely driven by technological change. Non-pecuniary factors influence the distribution of employment but have a less pronounced effect on equilibrium wages