Studies of individual wage dynamics typically ignore firm heterogeneity, whereas decompositions of earnings into worker and firm effects abstract from life-cycle considerations. We study firm effects in individual wage dynamics using administrative data on the population of Italian employers and employees. We propose a novel identification strategy for firm-related wage components exploiting the informative content of the wage covariance structure of coworkers. Wage inequality increases three-fold over the working life; firm effects are predominant while young, but sorting of workers into firms becomes increasingly important, explaining the largest share of lifetime inequality. Static models that do not allow for life-cycle dynamics underestimate the importance of sorting and overstate match and firm effects.

Cappellari, L., Bingley, P., Workers, Firms and Life-Cycle Wage Dynamics, <<IZA Discussion Paper>>, 2018; (11402): 1-47 [http://hdl.handle.net/10807/118301]

Workers, Firms and Life-Cycle Wage Dynamics

Cappellari, Lorenzo;
2018

Abstract

Studies of individual wage dynamics typically ignore firm heterogeneity, whereas decompositions of earnings into worker and firm effects abstract from life-cycle considerations. We study firm effects in individual wage dynamics using administrative data on the population of Italian employers and employees. We propose a novel identification strategy for firm-related wage components exploiting the informative content of the wage covariance structure of coworkers. Wage inequality increases three-fold over the working life; firm effects are predominant while young, but sorting of workers into firms becomes increasingly important, explaining the largest share of lifetime inequality. Static models that do not allow for life-cycle dynamics underestimate the importance of sorting and overstate match and firm effects.
2018
Inglese
IZA Discussion Paper
Cappellari, L., Bingley, P., Workers, Firms and Life-Cycle Wage Dynamics, <<IZA Discussion Paper>>, 2018; (11402): 1-47 [http://hdl.handle.net/10807/118301]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/118301
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