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The Importance of Firms in Wage Determination

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  • Max Gruetter
  • Rafael Lalive

Abstract

Firms are central to many theories of the labor market. However, the extent to which firms affect wages has only recently been explored using matched employer-employee data. This paper investigates (i) the importance of firms in explaining wage differences across individuals and industries, and (ii) how the nature of interfirm mobility � job-to-job vs. job-unemployment-job � affects the relative importance of firms and workers in wage determination. Results indicate that (i) firms are much more important in explaining the variance of average wages across industries rather than individuals, and (ii) using job-to-job transitions reduces the importance of firm wage policies in explaining differences.

Suggested Citation

  • Max Gruetter & Rafael Lalive, "undated". "The Importance of Firms in Wage Determination," IEW - Working Papers 207, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:207
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    More about this item

    Keywords

    interfirm mobility; wage determination; industry wage differentials; matched employer employee data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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