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Wage Structure, Raises and Mobility: International Comparisons of the Structure of Wages Within and Across Firms

  • Edward P. Lazear
  • Kathryn L. Shaw

The returns to talent or performance have grown over time in developed countries. Is talent concentrated in a few firms or are firms virtual microcosms of the economy, each having close to identical distributions of talent? The data show that talent is not concentrated in a few companies, but is widely dispersed across companies. Wage dispersion within firms is nearly as high as the wage dispersion overall. The standard deviation of wages within the firm is about 80% of the standard deviation across all workers in the economy. Firms are more similar than they are dissimilar, but they are not identical: the firm mean wage displays considerable dispersion across the population of firms. There is evidence that talent is becoming more concentrated over time within some firms relative to others. In four countries that estimated wage regressions with firm fixed effects, the firm fixed effects are contributing more to the R-squared of the wage regression over time. Law firms have more lawyers than janitors. Janitorial firms have more janitors than lawyers and the differences between firms have become more pronounced. Still, the variance of wages within the average firms remains high.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13654.

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Date of creation: Nov 2007
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Publication status: published as Wage Structure, Raises and Mobility: An Introduction to International Comparisons of the Structure of Wages Within and Across Firms , Edward P. Lazear, Kathryn L. Shaw. in The Structure of Wages: An International Comparison , Lazear and Shaw. 2008
Handle: RePEc:nbr:nberwo:13654
Note: LS PR
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  1. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
  2. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 375-410, July.
  3. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Thomas N. Hubbard, 2000. "The Demand For Monitoring Technologies: The Case Of Trucking," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 533-560, May.
  5. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
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