Firms and labor market inequality: evidence and some theory

David Card, Ana Rute Cardoso, Jörg Heining () and Patrick Kline
Additional contact information
Jörg Heining: Institute for Employment Research (IAB), Nuremberg, Germany

No 201619, IAB-Discussion Paper from Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]

Abstract: "We review the literature on firm-level drivers of labor market inequality. There is strong evidence from a variety of fields that standard measures of productivity - like output per worker or total factor productivity - vary substantially across firms, even within narrowly-defined industries. Several recent studies note that rising trends in the dispersion of productivity across firms mirror the trends in the wage inequality across workers. Two distinct literatures have searched for a more direct link between these two phenomena. The first examines how wages are affected by differences in employer productivity. Studies that focus on firm-specific productivity shocks and control for the non-random sorting of workers to more and less productive firms typically find that a 10% increase in value-added per worker leads to somewhere between a 0.5% and 1.5% increase in wages. A second literature focuses on firm-specific wage premiums, using the wage outcomes of job changers. This literature also concludes that firm pay setting is important for wage inequality, with many studies finding that firm wage effects contribute approximately 20% of the overall variance of wages. To interpret these findings, we develop a model where workplace environments are viewed as imperfect substitutes by workers, and firms set wages with some degree of market power. We show that simple versions of this model can readily match the stylized empirical findings in the literature regarding rent-sharing elasticities and the structure of firm-specific pay premiums." (Author's abstract, IAB-Doku) ((en))

Keywords: Betrieb; Einkommenseffekte; Gewinnbeteiligung; abhängig Beschäftigte; Lohnfindung; Lohntheorie; Lohnunterschied; Produktivitätsunterschied; qualifikationsspezifische Faktoren; Unternehmen; Wertschöpfung; Arbeitsplatzwechsel; zwischenbetriebliche Mobilität; 2004-2010 (search for similar items in EconPapers)
JEL-codes: D22 J31 J42 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2016
New Economics Papers: this item is included in nep-hrm, nep-lma and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

Published in/as: Journal of Labor Economics, Vol. 36, No. S1 (2018), S. S13-S70, doi:10.1086/694153

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https://doku.iab.de/discussionpapers/2016/dp1916.pdf

Related works:
Journal Article: Firms and Labor Market Inequality: Evidence and Some Theory (2018)
Working Paper: Firms and Labor Market Inequality: Evidence and Some Theory (2017)
Working Paper: Firms and Labor Market Inequality: Evidence and Some Theory (2016)
Working Paper: Firms and Labor Market Inequality: Evidence and Some Theory (2016)
Working Paper: Firms and Labor Market Inequality: Evidence and Some Theory (2016)
Chapter: Firms and Labor Market Inequality: Evidence and Some Theory (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:iab:iabdpa:201619

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