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Life-Cycle Wage Growth and Firm Productivity in Developed and Developing Economics

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  • Kerstin Holzheu

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics)

  • Juan Munoz-Morales

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - ULCO - Université du Littoral Côte d'Opale - Université de Lille - CNRS - Centre National de la Recherche Scientifique, Université de Lille)

Abstract

Life-cycle wage growth varies across countries. We examine the role of the firm productivity distribution by introducing a random-search model that disentangles firm productivity, on-the-job learning, and labor-market frictions. Estimates for Brazil, Colombia, and the United States reveal two firm-side disadvantages: a compressed right tail of high-productivity firms in Colombia, and a long left tail of low-productivity firms in Brazil. Counterfactuals show that equating each country's firm-productivity distribution to that of the United States closes most of the crosscountry gap in life-cycle wage growth: Brazil's wage growth rises from 73 to 103 percent of the U.S. value, and Colombia's from 52 to 115 percent. The conclusion is robust to alternative functional forms, education residualization, and external discipline on the productivity tail.

Suggested Citation

  • Kerstin Holzheu & Juan Munoz-Morales, 2026. "Life-Cycle Wage Growth and Firm Productivity in Developed and Developing Economics," Sciences Po Economics Publications (main) hal-05030546, HAL.
    • Handle: RePEc:hal:spmain:hal-05030546
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-05030546v3
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