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The Relative Importance of Employer and Employee Effects on Compensation: A Comparison of France and the United States

Listed author(s):
  • John M. Abowd

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique, Cornell University, Department of Labor Economics - Cornell University, IZA - Institute for the Study of Labor)

  • Francis Kramarz

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique, IZA - Institute for the Study of Labor)

  • David Margolis

    ()

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique, IZA - Institute for the Study of Labor, TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Kenneth R. Troske

    (University of Missouri, Department of Economics - University of Missouri-Columbia)

Using individual data on compensation, matched with establishment and firm data on performance and inputs, e compare the French and American pay systems. The compensation measures are decomposed into components related to measured individual characteristics, establishment–enterprise effects, and a residual. In France, the compensation outcomes are more compressed than in the United States. For France, individual characteristics and establishment effects explain more of the variability in compensation outcomes than in the United States. The observable and unobservable components of compensation are identically correlated in the two countries. The relations among compensation components (individual and establishment) and firm performance outcomes (value-added per worker, sales per worker, and profit per unit of capital) exhibit some important similarities and differences between the countries. Higher paid workers, either because of individual characteristics or establishment effects, are employed in firms that are more productive. Higher pay due to enterprise heterogeneity is associated with higher profitability in France but lower profitability in the United States.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00378212.

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Date of creation: Jan 1996
Publication status: Published in Allied Social Sciences Association annual meetings, Jan 1996, San Francisco, California, United States
Handle: RePEc:hal:cesptp:halshs-00378212
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00378212
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. Robert H Mcguckin & George A Pascoe, 1988. "The Longitudinal Research Database (LRD): Status And Research Possibilities," Working Papers 88-2, Center for Economic Studies, U.S. Census Bureau.
  2. Kimberly Bayard & Judith Hellerstein & David Neumark & Kenneth Troske, 2003. "New Evidence on Sex Segregation and Sex Differences in Wages from Matched Employee-Employer Data," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 887-922, October.
  3. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
  4. Kenneth R. Troske, 1998. "The Worker-Establishment Characteristics Database," NBER Chapters,in: Labor Statistics Measurement Issues, pages 371-404 National Bureau of Economic Research, Inc.
  5. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
  6. Harold Hotelling, 1932. "Edgeworth's Taxation Paradox and the Nature of Demand and Supply Functions," Journal of Political Economy, University of Chicago Press, vol. 40, pages 577-577.
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