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Decomposing productivity and wage effects of intraestablishment labor restructuring

  • Mika Maliranta

    (Research Institute of the Finnish Economy ETLA)

  • Pekka Ilmakunnas

    (Helsinki School of Economics & HECER)

Aggregate productivity growth can be decomposed into growth within establishments, between establishments, and the impact of entering and exiting establishments. We demonstrate that such a productivity decomposition formula can also be used for studying intraestablishment restructuring through the inflow and outflow of workers. There are, however, three requirements: Firstly, comprehensive longitudinal linked employeremployee data are needed. Secondly, now the productivity decomposition formula cannot be used for accounting but must be used as an estimation model. Thirdly, the decomposition formula should be such that a meaningful interpretation of its components is possible. The decomposition can also account for different worker types, e.g. age groups. We apply such a method to study the productivity growth and wage growth within the establishments of the Finnish business sector. The results provide empirical evidence on economic incentives for hiring young workers and separating older workers.

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Paper provided by EconWPA in its series Labor and Demography with number 0511003.

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Length: 28 pages
Date of creation: 04 Nov 2005
Date of revision:
Handle: RePEc:wpa:wuwpla:0511003
Note: Type of Document - pdf; pages: 28
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  2. 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.
  3. Klette, Tor Jakob & Kortum, Samuel, 2002. "Innovating Firms and Aggregate Innovation," Memorandum 02/2002, Oslo University, Department of Economics.
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  7. Pekka Ilmakunnas & Mika Maliranta, 2005. "Technology, Labour Characteristics and Wage-productivity Gaps," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(5), pages 623-645, October.
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  18. repec:rus:hseeco:122439 is not listed on IDEAS
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