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High-Wage Workers and High-Wage Firms

  • Abowd, J.M.
  • Kramarz, F.
  • Margolis, D.N.

Using a longitudinal sample of one million French workers and 500,000 employing firms, the authors decompose real total annual compensation per worker into components: observable employee characteristics, personal heterogeneity, firm heterogeneity, and residual. Unobserved personal heterogeneity is a very important source of wage variation. Unobserved firm heterogeneity, while important, is not as important as person effects. Enterprises that hire high-wage workers are more productive but not more profitable. Enterprises that pay higher wages, controlling for person effects, are more productive and more profitable. Person effects explain about 90 percent of interindustry and firm-size wage differences while firm effects explain substantially less.

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File URL: http://hdl.handle.net/1866/2120
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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 9503.

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Length: 72 pages
Date of creation: 1995
Date of revision:
Handle: RePEc:mtl:montde:9503
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Web page: http://www.sceco.umontreal.ca

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