The Importance of Worker, Firm and Match Fixed Effects in the Formation of Wages
AbstractThis paper estimates a Mincerian wage equation with worker, firm, and match specific fixed effects and thereby complements the growing empirical literature started by the seminal paper of Abowd, Kramarz and Margolis (1999). The analysis takes advantage of the extensive Danish IDA data, which provides wage information on the whole working population for a 24-year period. We find that the major part of wage dispersion in the Danish labor market can be explained by differences in worker characteristics. However, the relative contribution of the three components varies across subgroups of workers. The match effect contributes a non-neglible part to the overall wage dispersion and, fur- thermore, corrects the estimated returns to experience. An analysis of inter-industry wage differentials shows that firm characteristics are more important at the industry level than at the worker level. Like- wise, we find evidence of high wage workers sorting into high wage industries but not into high wage firms within industries. The mobility pattern of workers is related to the quality of the firm and the match, and we find that the wage gain from job mobility depends on worker characteristics.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2009-11.
Date of creation: 01 Dec 2009
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Web page: http://www.econ.au.dk/afn/
MEE data; fixed effects; wage dispersion;
Find related papers by JEL classification:
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-19 (All new papers)
- NEP-LAB-2009-12-19 (Labour Economics)
- NEP-LTV-2009-12-19 (Unemployment, Inequality & Poverty)
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- Kenneth Lykke Sørensen & Rune Vejlin, 2011.
"Worker and Firm Heterogeneity in Wage Growth: An AKM Approach,"
CEIS, vol. 25(4), pages 485-507, December.
- Kenneth L. Sørensen & Rune M. Vejlin, 2010. "Worker and Firm Heterogeneity in Wage Growth: An AKM approach," Economics Working Papers 2010-13, School of Economics and Management, University of Aarhus.
- Laurent Gobillon & François-Charles Wolff & Patrice Guillotreau, 2013. "The anatomy of prices on the French fish market," PSE Working Papers halshs-00839147, HAL.
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