Earnings Dynamics and Firm-Level Shocks

Benjamin Friedrich, Lisa Laun, Costas Meghir and Luigi Pistaferri
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Benjamin Friedrich: Northwestern University
Costas Meghir: Yale University
Luigi Pistaferri: Stanford University

No 2383, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We use matched employer-employee data from Sweden to study the role of the Þrm 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. The pass-through of temporary shocks is smaller in magnitude and similar for high- and low-skilled workers. The updates to worker-Þrm specific match effects over the life of a Þrm-worker relationship are small. Substantial growth in earnings variance over the life cycle for high-skilled workers is driven by Þrms. In particular, cross-sectional wage variances by age 55 are roughly one- third higher relative to a scenario with no pass-through of Þrm shocks onto wages.

Pages: 116 pages
Date: 2024-02
New Economics Papers: this item is included in nep-bec, nep-hrm, nep-lma and nep-ltv
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https://cowles.yale.edu/sites/default/files/2024-02/d2383.pdf (application/pdf)

Related works:
Working Paper: Earnings dynamics and firm-level shocks (2021)
Working Paper: Earnings Dynamics and Firm-Level Shocks (2019)
Working Paper: Earnings Dynamics and Firm-Level Shocks (2019)
Working Paper: Earnings Dynamics and Firm-Level Shocks (2019)
Working Paper: Earnings Dynamics and Firm-Level Shocks (2018)
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