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Wage Dynamics along the Life-Cycle of Manufacturing Plants


  • Emin Dinlersoz
  • Henry Hyatt
  • Sang Nguyen


This paper explores the evolution of average wage paid to employees along the life-cycle of a manufacturing plant in U.S. Average wage starts out low for a new plant and increases along with labor productivity, as the plant survives and ages. As a plant experiences productivity decline and approaches exit, average wage falls, but more slowly than it rises in the case of surviving new plants. Moreover, average wage declines slower than productivity does in failing plants, while it rises relatively faster as productivity increases in surviving new plants. These empirical regularities are studied in a dynamic model of labor quality and quantity choice by plants, where labor quality is reflected in wages. The model’s parameters are estimated to assess the costs a plant incurs as it alters its labor quality and quantity in response to changes in its productivity over its life-cycle.

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  • Emin Dinlersoz & Henry Hyatt & Sang Nguyen, 2011. "Wage Dynamics along the Life-Cycle of Manufacturing Plants," Working Papers 11-24r, Center for Economic Studies, U.S. Census Bureau, revised Mar 2013.
  • Handle: RePEc:cen:wpaper:11-24r

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    References listed on IDEAS

    1. Kirk White & Arpad Abraham, 2004. "The Dynamics of Plant-level Productivity in U.S. Manufacturing," Computing in Economics and Finance 2004 332, Society for Computational Economics.
    2. Catherine Fuss & Ladislav Wintr, 2009. "Rigid labour compensation and flexible employment ? Firm-level evidence with regard to productivity for Belgium," Working Paper Research 159, National Bank of Belgium.
    3. Fredrik Heyman, 2007. "Firm Size or Firm Age? The Effect on Wages Using Matched Employer–Employee Data," LABOUR, CEIS, vol. 21(2), pages 237-263, June.
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    Wage dynamics; plant productivity; firm dynamics; plant life-cycle; employment dynamics; manufacturing.;

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