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It's Where You Work: Increases in Earnings Dispersion across Establishments and Individuals in the US

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  • Erling Barth
  • Alex Bryson
  • James C. Davis
  • Richard Freeman

Abstract

This paper links data on establishments and individuals to analyze the role of establishments in the increase in inequality that has become a central topic in economic analysis and policy debate. It decomposes changes in the variance of ln earnings among individuals into the part due to changes in earnings among establishments and the part due to changes in earnings within-establishments and finds that much of the 1970s-2010s increase in earnings inequality results from increased dispersion of the earnings among the establishments where individuals work. It also shows that the divergence of establishment earnings occurred within and across industries and was associated with increased variance of revenues per worker. Our results direct attention to the fundamental role of establishment-level pay setting and economic adjustments in earnings inequality.

Suggested Citation

  • Erling Barth & Alex Bryson & James C. Davis & Richard Freeman, 2014. "It's Where You Work: Increases in Earnings Dispersion across Establishments and Individuals in the US," CEP Discussion Papers dp1311, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1311
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    More about this item

    Keywords

    Earnings; earnings inequality; productivity;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D3 - Microeconomics - - Distribution

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