Firm pay dynamics

Niklas Engbom (), Christian Moser and Jan Sauermann ()
Additional contact information
Niklas Engbom: New York University, Postal: New York University
Jan Sauermann: IFAU - Institute for Evaluation of Labour Market and Education Policy, Postal: Institute for Evaluation of Labour Market and Education Policy, P O Box 513, SE-751 20 Uppsala, Sweden

No 2021:21, Working Paper Series from IFAU - Institute for Evaluation of Labour Market and Education Policy

Abstract: We study the nature of firm pay dynamics. To this end, we propose a statistical model that extends the seminal framework by Abowd, Kramarz, and Margolis (1999a) to allow for idiosyncratically time-varying firm pay policies. We estimate the model using linked employer-employee data for Sweden from 1985 to 2015. By drawing on detailed firm financials data, we show that firms that become more productive and accumulate capital raise pay, whereas firms lower pay as they add workers. A secular increase in firm-year pay dispersion in Sweden since 1985 is accounted for by greater persistence of firm pay among incumbent firms as well as greater dispersion in firm pay among entrant firms, as opposed to more volatile firm pay.

Keywords: Earnings Inequality; Worker and Firm Heterogeneity; Linked Employer-Employee Data; AKM; Two-Way Fixed Effects Model; Firm Dynamics (search for similar items in EconPapers)
JEL-codes: D22 D31 E24 J31 M13 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2021-12-17
New Economics Papers: this item is included in nep-bec, nep-eur, nep-hrm, nep-lma and nep-mac
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Related works:
Journal Article: Firm pay dynamics (2023)
Working Paper: Firm Pay Dynamics (2022)
Working Paper: Firm Pay Dynamics (2022)
Working Paper: Firm Pay Dynamics (2022)
Working Paper: Firm Pay Dynamics (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:ifauwp:2021_021

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