Firm Pay Dynamics

Niklas Engbom and Christian Moser

MPRA Paper from University Library of Munich, Germany

Abstract: We study the nature of firm pay dynamics using matched employer-employee data from Sweden, including rich, administrative firm financial data. To this end, we propose and estimate a statistical model that extends the seminal framework by Abowd, Kramarz, and Margolis (1999a, henceforth AKM) to flexibly account for time-varying firm pay policies. We validate our approach by showing that firm-year pay variation is systematically related to firm financial performance. Subsequently, we apply our methodology to assess the role of firm pay dynamics in accounting for a rise in earnings inequality in Sweden, to investigate the properties of the distribution of within-firm pay differences over time, to measure the degree of firm pay mobility, and to quantify the relative contribution of ex-ante versus ex-post heterogeneity towards firm pay differences over the firm life cycle. We conclude that no more than two thirds of firm pay heterogeneity are permanent, with persistent and transitory fluctuations in firm pay constituting the remainder.

Keywords: Wage Determination; Mobility; Worker and Firm Heterogeneity; Two-Way Fixed Effects Model; AKM; Firm Dynamics; Inequality Trends; Income Risk; Insurance within the Firm (search for similar items in EconPapers)
JEL-codes: D22 D31 E24 J31 M13 (search for similar items in EconPapers)
Date: 2020-02-03
New Economics Papers: this item is included in nep-hrm, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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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 (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98477

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