Working Paper: CEPR ID: DP14240
Authors: Benjamin Friedrich; Lisa Laun; Costas Meghir; Luigi Pistaferri
Abstract: We use matched employer-employee data from Sweden to study the role of the firm in affecting the stochastic properties of wages. Our model accounts for endogenous participation and mobility decisions. We find that firm-specific permanent productivity shocks transmit to individual wages, but the effect is mostly concentrated among the high-skilled workers; firm-specific temporary shocks mostly affect the low-skilled. The updates to worker-firm specific match effects over the life of a firm-worker relationship are small. Substantial growth in earnings variance over the life cycle for high-skilled workers is driven by firms accounting for 44% of cross-sectional variance by age 55.
Keywords: Matched employer-employee data; Earnings dynamics; Firm dynamics
JEL Codes: H51; H55; I18; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm-specific permanent productivity shocks (D25) | individual wages (J31) |
| higher firm productivity (D21) | higher wages (J39) |
| firm-specific temporary shocks (D25) | individual wages for low-skilled workers (J31) |
| firm-specific shocks (L20) | updates to worker-firm specific match effects (J69) |
| firm-specific shocks (L20) | earnings variance for high-skilled workers (J31) |
| eliminating passthrough of firm shocks (H32) | wage variance (J31) |
| firm performance (L25) | wage growth and variance over time (J31) |