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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.

Suggested Citation

  • Edward P. Lazear & Kathryn L. Shaw, 2007. "Wage Structure, Raises and Mobility: International Comparisons of the Structure of Wages Within and Across Firms," NBER Working Papers 13654, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13654
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    References listed on IDEAS

    1. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 375-410.
    3. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
    4. Thomas N. Hubbard, 2000. "The Demand for Monitoring Technologies: The Case of Trucking," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 533-560.
    5. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-480, March.
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    Cited by:

    1. Hipólito Simón, 2010. "International Differences in Wage Inequality: A New Glance with European Matched Employer-Employee Data," British Journal of Industrial Relations, London School of Economics, vol. 48(2), pages 310-346, June.
    2. Thomas Åstebro & Pontus Braunerhjelm & Anders Broström, 2013. "Does academic entrepreneurship pay?," Industrial and Corporate Change, Oxford University Press, vol. 22(1), pages 281-311, February.
    3. Gavilan, Angel, 2012. "Wage inequality, segregation by skill and the price of capital in an assignment model," European Economic Review, Elsevier, vol. 56(1), pages 116-137.
    4. Valeria Cirillo & Matteo Sostero & Federico Tamagni, 2017. "Innovation and within-firm wage inequalities: empirical evidence from major European countries," Industry and Innovation, Taylor & Francis Journals, vol. 24(5), pages 468-491, July.

    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • 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

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