High Wage Workers and High Wage Firms

John Abowd (), Francis Kramarz () and David Margolis

No 4917, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study a longitudinal sample of over one million French workers and over 500,000 employing firms. Real total annual compensation per worker is decomposed into components related to observable characteristics, worker heterogeneity, firm heterogeneity and residual variation. Except for the residual, all components may be correlated in an arbitrary fashion. At the level of the individual, we find that person-effects, especially those not related to observables like education, are the most important source of wage variation in France. Firm-effects, while important, are not as important as person-effects. At the level of firms, we find that enterprises that hire high-wage workers are more productive but not more profitable. They are also more capital and high-skilled employee intensive. Enterprises that pay higher wages, controlling for person-effects, are more productive and more profitable. They are also more capital intensive but are not more high-skilled labor intensive. We also find that person-effects explain 92% of inter-industry wage differentials.

JEL-codes: C23 J31 (search for similar items in EconPapers)
Date: 1994-11
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Published as Econometrica, Vol. 67, no. 2 (March 1999): 251-337.

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Related works:
Journal Article: High Wage Workers and High Wage Firms (1999)
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