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Firm Performance and the Volatility of Worker Earnings

In: Firms and the Distribution of Income: The Roles of Productivity and Luck

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  • Chinhui Juhn
  • Kristin McCue
  • Holly Monti
  • Brooks Pierce

Abstract

Using linked employer-employee data for the United States, we examine whether shocks to firm revenues are transmitted to the earnings of continuing employees. While full insurance is rejected, the elasticity of worker earnings with respect to persistent shocks in firm revenues is small and consistent with the notion that firms insulate workers from idiosyncratic shocks. Exploring the heterogeneity of effects, we find the largest elasticity in professional services among employees in the top 5% of their employers' earnings distribution, suggesting that in certain jobs performance pay may be a countervailing force to wage insurance.
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Suggested Citation

  • Chinhui Juhn & Kristin McCue & Holly Monti & Brooks Pierce, 2015. "Firm Performance and the Volatility of Worker Earnings," NBER Chapters, in: Firms and the Distribution of Income: The Roles of Productivity and Luck, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:13718
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    Cited by:

    1. Michael W. L. Elsby & Gary Solon, 2019. "How Prevalent Is Downward Rigidity in Nominal Wages? International Evidence from Payroll Records and Pay Slips," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 185-201, Summer.
    2. Wenjing Duan & Pedro S. Martins, 2018. "Rent sharing in China: Magnitude, heterogeneity and drivers," Working Papers 96, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    3. Kerndler, Martin, 2019. "Size and persistence matter: Wage and employment insurance at the micro level," ECON WPS - Working Papers in Economic Theory and Policy 04/2019, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    4. Mons Chan & Ming Xu & Sergio Salgado, 2019. "Heterogeneous Passthrough from TFP to Wages," 2019 Meeting Papers 1447, Society for Economic Dynamics.
    5. Maibom, Jonas & Vejlin, Rune Majlund, 2021. "Passthrough of Firm Performance to Income and Employment Stability," IZA Discussion Papers 14131, Institute of Labor Economics (IZA).
    6. Vladimir Nusinov & Ievgeniia Mishchuk & Yaroslav Izmaylov, 2019. "Development Of The Stereometric Method To The Analysis Of Economic Categories And Processes And Its Application In Security And Taxation," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 5(4).

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    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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