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Firm-Wide Versus Establishment-Specific Labor-Market Practices

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Author Info

  • David S. Kaplan

    ()
    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

  • Brooks Pierce

    ()
    (U.S. Bureau of Labor Statistics)

Abstract

Economists have devoted substantial effort to understanding why some productive activities are organized under the same firm, with the majority of empirical studies focusing on product or capital markets. Using a unique data set that links occupational data from separate establishments to the establishments’ ultimate beneficial owners, we are the first to study labor markets across establishments and across industries within large and diverse firms. We use these data to determine how wages and employment in firms’ different establishments and different industries are related. We first identify patterns in the wage and occupational profiles of the industries that multi-industry firms choose to enter. We then show there to be a substantial component of wage rates common to all establishments and all industries within individual firms, even after netting out industry and occupation effects. This demonstrates the extent that internal labor markets of large, multi-establishment, multi-industry firms are linked throughout their entire organizations. Finally, we show that employment changes tend to be localized within establishments, suggesting that demand or productivity shocks to an establishment do not permeate throughout the firm.

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File URL: http://ftp.itam.mx/pub/academico/inves/kaplan/01-05.pdf
File Function: First version, 2001
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Bibliographic Info

Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0105.

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Length: 38 pages
Date of creation: Mar 2001
Date of revision:
Handle: RePEc:cie:wpaper:0105

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  1. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  2. Kenneth R. Troske, 1998. "Evidence on the Employer Size-Wage Premium From Worker-Establishment Matched Data," Labor and Demography 9807001, EconWPA.
  3. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
  4. Anita M. McGahan & Michael E. Porter, 1999. "The Persistence of Shocks to Profitability," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 143-153, February.
  5. Lamont, Owen, 1997. " Cash Flow and Investment: Evidence from Internal Capital Markets," Journal of Finance, American Finance Association, vol. 52(1), pages 83-109, March.
  6. Bronars, Stephen G & Famulari, Melissa, 1997. "Wage, Tenure, and Wage Growth Variation within and across Establishment," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 285-317, April.
  7. Berger, Philip G. & Ofek, Eli, 1995. "Diversification's effect on firm value," Journal of Financial Economics, Elsevier, vol. 37(1), pages 39-65, January.
  8. Schmalensee, Richard, 1985. "Do Markets Differ Much?," American Economic Review, American Economic Association, vol. 75(3), pages 341-51, June.
  9. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  10. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
  11. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
  12. Groshen, Erica L, 1991. "Sources of Intra-industry Wage Dispersion: How Much Do Employers Matter?," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 869-84, August.
  13. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
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Cited by:
  1. Richard Duhautois & Fabrice Gilles & Héloïse Petit, 2012. "Worker flows and establishment wage differentials : a breakdown of the relationship," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00833872, HAL.

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