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The importance of firms in wage determination

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Author Info
Gruetter, Max
Lalive, Rafael

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Abstract

Firms are central to many theories of the labor market. However, the actual degree to which firms shape the structure of wages is still not well understood. This paper investigates (i) the importance of firms in explaining wage differences across individuals and industries, and (ii) how the nature of interfirm mobility - job-to-job vs. job-unemployment-job - affects the relative importance of firms and workers in wage determination. Results indicate that (i) firms are much more important in explaining the variance of average wages across industries rather than across individuals, and (ii) using job-to-job transitions to identify the firm's contribution to the wage rate reduces the importance of firm wage policies in explaining wage differences by as much as 50%.

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Publisher Info
Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 16 (2009)
Issue (Month): 2 (April)
Pages: 149-160
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Handle: RePEc:eee:labeco:v:16:y:2009:i:2:p:149-160

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Keywords: Interfirm mobility Wage determination Industry wage differentials Matched employer employee data;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Bernd Fitzenberger & Alfred Garloff, 2005. "Unemployment, Labor Market Transitions, and Residual Wage Dispersion," Working Papers of the Research Group Heterogenous Labor 05-02, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim. [Downloadable!]
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  3. Simon D. Woodcock, 2007. "Match Effects," Discussion Papers dp07-13, Department of Economics, Simon Fraser University. [Downloadable!]
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  5. Fitzenberger, Bernd & Garloff, Alfred, 2005. "Unemployment, Labor Market Transitions, and Residual Wage Dispersion," ZEW Discussion Papers 05-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  8. Fehr, Ernst & Fischbacher, Urs & Kosfeld, Michael, 2005. "Neuroeconomic Foundation of Trust and Social Preferences," CEPR Discussion Papers 5127, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Peter Woehrmann & Willi Semmler & Martin Lettau, . "Nonparametric Estimation of the Time-varying Sharpe Ratio in Dynamic Asset Pricing Models," IEW - Working Papers iewwp225, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  10. Simon D. Woodcock, 2005. "Heterogeneity and Learning in Labor Markets," Labor and Demography 0511012, EconWPA. [Downloadable!]
  11. M. Andrews & L. Gill & R. Upward, 2006. "High wage workers and low wage firms: Negative assortative matching or statistical artefact?," The School of Economics Discussion Paper Series 0615, Economics, The University of Manchester. [Downloadable!]
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  16. Margit Osterloh & Bruno S. Frey, . "Shareholders Should Welcome Employees as Directors," IEW - Working Papers iewwp228, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  17. Thomas Cornelißen & Olaf Hübler, 2007. "Unobserved Individual and Firm Heterogeneity in Wage and Tenure Functions: Evidence from German Linked Employer-Employee Data," IZA Discussion Papers 2741, Institute for the Study of Labor (IZA). [Downloadable!]
  18. Anke Gerber, . "Learning in and about Games," IEW - Working Papers iewwp234, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  19. Peter Woehrmann, . "A dynamic model of the financial–real interaction as a model selection criterion for nonparametric stock market prediction," IEW - Working Papers iewwp226, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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