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Do volatile firms pay volatile earnings? Evidence from linked worker-firm data

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  • Michael R. Strain

Abstract

Despite the importance of earnings instability, little is known about its correlates or causes. This article seeks to better understand earnings instability by studying whether volatile firms pay volatile earnings and is the first to directly test the relationship using US linked employer–employee data. The article finds a positive and statistically significant relationship using within-firm variation. In addition, this article finds that lower earning workers are passed significantly more volatility from their employing firms than are higher earning workers.

Suggested Citation

  • Michael R. Strain, 2017. "Do volatile firms pay volatile earnings? Evidence from linked worker-firm data," Applied Economics, Taylor & Francis Journals, vol. 49(43), pages 4299-4309, September.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:43:p:4299-4309
    DOI: 10.1080/00036846.2017.1279273
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    References listed on IDEAS

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    1. Sule Celik & Chinhui Juhn & Kristin McCue & Jesse Thompson, 2009. "Understanding Earnings Instability: How Important are Employment Fluctuations and Job Changes?," Working Papers 09-20, Center for Economic Studies, U.S. Census Bureau.
    2. Peter Gottschalk & Erika McEntarfer & Robert Moffitt, 2008. "Trends in the Transitory Variance of Male Earnings in the U.S., 1991-2003: Preliminary Evidence from LEHD data," Boston College Working Papers in Economics 696, Boston College Department of Economics.
    3. Webber, Douglas A., 2015. "Firm market power and the earnings distribution," Labour Economics, Elsevier, vol. 35(C), pages 123-134.
    4. Comin, Diego & Groshen, Erica L. & Rabin, Bess, 2009. "Turbulent firms, turbulent wages?," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 109-133, January.
    5. Robert A. Moffitt & Peter Gottschalk, 2012. "Trends in the Transitory Variance of Male Earnings: Methods and Evidence," Journal of Human Resources, University of Wisconsin Press, vol. 47(1), pages 204-236.
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    Cited by:

    1. Karel Janda, 2019. "Earnings Stability and Peer Company Selection for Multiple Based Indirect Valuation," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(1), pages 37-75, February.

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