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Firms and Labor Market Inequality: Evidence and Some Theory

David Card, Ana Rute Cardoso (), Jörg Heining and Patrick Kline

No 976, Working Papers from Barcelona Graduate School of Economics

Abstract: We synthesize two related literatures on firm-level drivers of wage inequality. Studies of rent sharing that use matched worker-firm data find elasticities of wages with respect to value added per worker in the range of 0.05 to 0.15. Studies of wage determination with worker and firm fixed effects typically find that firm-specific premiums explain 20% of overall wage variation. To interpret these findings we develop a model of wage setting in which workers have idiosyncratic tastes for different workplaces. Simple versions of this model can rationalize standard fixed effects specifications and also match the typical rent-sharing elasticities in the literature.

Keywords: Rent sharing; two-way fixed effects; Monopsony (search for similar items in EconPapers)
JEL-codes: D22 J31 J42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lma and nep-ltv
Date: 2017-06
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Related works:
Journal Article: Firms and Labor Market Inequality: Evidence and Some Theory (2018) Downloads
Working Paper: Firms and labor market inequality: evidence and some theory (2016) Downloads
Working Paper: Firms and Labor Market Inequality: Evidence and Some Theory (2016) Downloads
Working Paper: Firms and Labor Market Inequality: Evidence and Some Theory (2016) Downloads
Chapter: Firms and Labor Market Inequality: Evidence and Some Theory (2015)
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