Working Paper: NBER ID: w23102
Authors: Chinhui Juhn; Kristin McCue; Holly Monti; Brooks Pierce
Abstract: Using linked employer-employee data for the U.S., we examine whether shocks to firm revenues are transmitted to the earnings of continuing employees. While full insurance is rejected, the elasticity of worker earnings with respect to persistent shocks in firm revenues is small and consistent with the notion that firms insulate workers from idiosyncratic shocks. Exploring heterogeneity of effects, we find the largest elasticity in professional services, among employees in the top 5% of their employers’ earnings distribution, suggesting that in certain jobs performance pay may be a countervailing force to wage insurance.
Keywords: firm performance; worker earnings volatility; wage insurance; performance pay
JEL Codes: J01; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| temporary shocks in firm revenues (E32) | changes in worker earnings (J31) |
| shocks to firm revenues (F69) | changes in worker earnings (J31) |
| firm shocks (G32) | worker earnings (J31) |
| persistent shocks in firm revenues (E32) | worker earnings (J31) |
| firm performance (L25) | worker earnings (J31) |
| idiosyncratic shocks (D89) | worker earnings (J31) |