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Wage Dynamics along the Life-Cycle of Manufacturing Plants

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Author Info

  • Emin Dinlersoz
  • Henry Hyatt
  • Sang Nguyen

Abstract

This paper explores the evolution of average wage paid to employees along the life-cycle of a manufacturing plant in U.S. Average wage starts out low for a new plant and increases along with labor productivity, as the plant survives and ages. As a plant experiences productivity decline and approaches exit, average wage falls, but more slowly than it rises in the case of surviving new plants. Moreover, average wage declines slower than productivity does in failing plants, while it rises relatively faster as productivity increases in surviving new plants. These empirical regularities are studied in a dynamic model of labor quality and quantity choice by plants, where labor quality is reflected in wages. The model’s parameters are estimated to assess the costs a plant incurs as it alters its labor quality and quantity in response to changes in its productivity over its life-cycle.

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File URL: ftp://ftp2.census.gov/ces/wp/2011/CES-WP-11-24R.pdf
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 11-24r.

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Length: 39 pages
Date of creation: Aug 2011
Date of revision: Mar 2013
Handle: RePEc:cen:wpaper:11-24r

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Related research

Keywords: Wage dynamics; plant productivity; firm dynamics; plant life-cycle; employment dynamics; manufacturing.;

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References

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  1. Fredrik Heyman, 2007. "Firm Size or Firm Age? The Effect on Wages Using Matched Employer-Employee Data," LABOUR, CEIS, vol. 21(2), pages 237-263, 06.
  2. Fuss, Catherine & Wintr, Ladislav, 2009. "Rigid labour compensation and flexible employment? Firm-level evidence with regard to productivity for Belgium," Working Paper Series 1021, European Central Bank.
  3. Kirk White & Arpad Abraham, 2004. "The Dynamics of Plant-level Productivity in U.S. Manufacturing," Computing in Economics and Finance 2004 332, Society for Computational Economics.
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