We study a longitudinal sample of over one million French workers and over 500,000 employing firms. Real total annual compensation per worker is decomposed into components related to observable characteristics, worker heterogeneity, firm heterogeneity and residual variation. Except for the residual, all components may be correlated in an arbitrary fashion. At the level of the individual, we find that person-effects, especially those not related to observables like education, are the most important source of wage variation in France. Firm-effects, while important, are not as important as person-effects. At the level of firms, we find that enterprises that hire high-wage workers are more productive but not more profitable. They are also more capital and high-skilled employee intensive. Enterprises that pay higher wages, controlling for person-effects, are more productive and more profitable. They are also more capital intensive but are not more high-skilled labor intensive. We also find that person-effects explain 92% of inter-industry wage differentials.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4917.
Length: Date of creation: Nov 1994 Date of revision: Publication status: published as Econometrica, Vol. 67, no. 2 (March 1999): 251-337. Handle: RePEc:nbr:nberwo:4917
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Find related papers by JEL classification: J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel 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.:
Gibbons, R. & Katz, L.F., 1989.
"Layoffs And Lemons,"
Working papers
531, Massachusetts Institute of Technology (MIT), Department of Economics.
Other versions:
Robert Gibbons & Lawrence Katz, 1989.
"Layoffs and Lemons,"
Working Papers
629, Princeton University, Department of Economics, Industrial Relations Section..
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Robert Gibbons & Lawrence Katz, 1991.
"Layoffs and Lemons,"
NBER Working Papers
2968, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Gibbons, Robert & Katz, Lawrence F, 1991.
"Layoffs and Lemons,"
Journal of Labor Economics,
University of Chicago Press, vol. 9(4), pages 351-80, October.
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