Persistence of Firm and Individual Wage Components

Jonathan S. Leonard () and M. Van Audenrode

Working Papers from Laval - Recherche en Politique Economique

Abstract: Using longitudinal matched employer-employee data, we show that a standard wage equation ignoring firm and individual effects yields a baseline explaining 36 percent of wage variation. Firm specific wage components, including common firm-wide omitted human capital, accounts for an additional 22 percent. Firm pay differentials are large and persistent. Most of these firm differentials reflect omitted general human capital. We also show the importance of asymmetric information and unobserved heterogeneity in wage setting mechanisms.

Keywords: WAGES; CORPORATIONS; LABOUR MARKET; INFORMATION (search for similar items in EconPapers)
JEL-codes: D80 D82 J31 (search for similar items in EconPapers)
Date: 1996

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