The Wage of Temporary Agency Workers

Using French administrative data we estimate the wage gap distribution be- tween in-house and temporary agency workers working in the same establishment and the same occupation. The average wage gap is about 3% in favor of in-house workers, but the gap is negative in more than 25% of establishment × occupa- tion cells. We develop and estimate a search and matching model which shows that while the wage gap is largely inefficient, eliminating it reduces efficiency, as it also arises from objective factors that contribute to the efficient allocation of jobs. Key words: Wage gap, Temporary Work Agency, labor market frictions.