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Wage inequality and firm productivity: analysis with employer-employee data

Author

Listed:
  • Valerie Lankester-Campos

    (Department of Economic Research, Central Bank of Costa Rica)

  • Catalina Sandoval-Alvarado

    (Department of Economic Research, Central Bank of Costa Rica)

Abstract

In recent years there has been an increase in income inequality in Costa Rica. This technical note shows the study of the relationship between-firm wage inequality and firm productivity for the country under the framework of the OECD LinkEED project. The analysis was carried out using an empirical procedure provided by the OECD with a dataset from the Costa Rican Central Bank that matches employer-employee data in the period 2006 to 2017. The results indicate that wage inequality slightly increased in Costa Rica between 2006 and 2017. The results also show that of this increase 36% was due to between-firm dispersion. This increase seems to be completely explained by an increase of differences in the workforce composition between firms, while the dispersion between firms due to factors related to firm wage premia was decreased. The estimates of the pass-through of firm productivity to wages was around 0.05%. ***Resumen: En los últimos años ha habido un aumento de la desigualdad de los ingresos en Costa Rica. Esta nota técnica estudia la relación entre la desigualdad salarial entre firmas y la productividad de las empresas en el país, en el marco del proyecto LinkEED de la OCDE. El análisis se llevó a cabo utilizando un procedimiento empírico proporcionado por la OCDE con una base de datos del Banco Central de Costa Rica que vinculada información entre empleadores y empleados en el período 2006 a 2017. Los resultados indican que la desigualdad salarial aumentó levemente en Costa Rica entre 2006 y 2017. El 36% de ese aumento se debió a la dispersión salarial entre empresas. Esto parece explicarse completamente por un aumento de las diferencias en la composición de la fuerza laboral entre empresas, mientras que la dispersión entre empresas debido a factores relacionados con el premio salarial que pagan las empresas se redujo. Además, se estimó que, en este periodo, el traspaso de la productividad de las firmas a los salarios fue de alrededor de 0,05%.

Suggested Citation

  • Valerie Lankester-Campos & Catalina Sandoval-Alvarado, 2021. "Wage inequality and firm productivity: analysis with employer-employee data," Notas Técnicas 2105, Banco Central de Costa Rica.
    • Handle: RePEc:apk:nottec:2105
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    File URL: https://repositorioinvestigaciones.bccr.fi.cr/handle/20.500.12506/350
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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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