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A Users' Guide to Uncovering Worker and Firm Effects: The ABC of AKM

Author

Listed:
  • Stephane Bonhomme
  • Elena Manresa
  • Thibaut Lamadon

Abstract

The AKM model introduced by Abowd, Kramarz and Margolis (1999) has become a workhorse to study worker and firm heterogeneity, and to understand the sources of wage dispersion in the labor market using linked employer-employee data. In this article, we introduce the model and estimator, discuss some best practices for estimation, and review some empirical findings on the role of worker and firm heterogeneity in wage dispersion. While the AKM methodology has proven useful to analyze a host of questions in a variety of settings within labor economics and beyond, we also point to the need for methodological developments.

Suggested Citation

  • Stephane Bonhomme & Elena Manresa & Thibaut Lamadon, 2026. "A Users' Guide to Uncovering Worker and Firm Effects: The ABC of AKM," Papers 2603.17034, arXiv.org, revised Apr 2026.
    • Handle: RePEc:arx:papers:2603.17034
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    References listed on IDEAS

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