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High Wage Workers and High Wage Firms

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Author Info
John M. Abowd
Francis Kramarz
David N. Margolis

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Abstract

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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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 67 (1999)
Issue (Month): 2 (March)
Pages: 251-334
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Handle: RePEc:ecm:emetrp:v:67:y:1999:i:2:p:251-334

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  4. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June. [Downloadable!] (restricted)
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  9. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Dickens, William T & Lang, Kevin, 1985. "A Test of Dual Labor Market Theory," American Economic Review, American Economic Association, vol. 75(4), pages 792-805, September. [Downloadable!] (restricted)
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  16. Robert Gibbons & Kevin Murphy, 1989. "Relative Performance Evaluation for Chief Executive Officers," Working Papers 628, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  17. Abowd, John M & Lemieux, Thomas, 1993. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 983-1014, November. [Downloadable!] (restricted)
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  18. Topel, Robert H & Ward, Michael P, 1992. "Job Mobility and the Careers of Young Men," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 439-79, May. [Downloadable!] (restricted)
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  19. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier. [Downloadable!] (restricted)
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  21. Jonathan S. Leonard, 1990. "Executive pay and firm performance," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 43(3), pages 13-29, February.
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  23. Robert Gibbons & Kevin J. Murphy, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," NBER Working Papers 3792, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  25. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-80, March. [Downloadable!] (restricted)
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  26. Sappington, David E M, 1991. "Incentives in Principal-Agent Relationships," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 45-66, Spring. [Downloadable!] (restricted)
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  29. Thaler, Richard H, 1989. "Interindustry Wage Differentials," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 181-93, Spring. [Downloadable!] (restricted)
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