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In the Land of AKM: Explaining the Dynamics of Wage Inequality in France

Author

Listed:
  • Damien Babet
  • Olivier Godechot
  • Marco G. Palladino

Abstract

We use a newly constructed and quasi-exhaustive matched employer-employee database to study the contribution of firms to wage inequality in France. We implement a simple and tractable correction for the limited mobility bias. Our analysis, covering the period 2002-2019, reveals an increase in between-firm inequality, mainly due to the growing clustering of workers with similar market value. These phenomena are associated with increasing occupational specialization at the firm level. Our results highlight the importance of bias-corrected AKM estimates of the Abowd, Kramarz et Margolis (1999) model –hereafter AKM- in capturing the dynamics of wage inequality, and show how boThéobservable job types and unobservable individual characteristics contribute to these patterns.Classification-JEL: E31, E62

Suggested Citation

  • Damien Babet & Olivier Godechot & Marco G. Palladino, 2025. "In the Land of AKM: Explaining the Dynamics of Wage Inequality in France," Working papers 987, Banque de France.
    • Handle: RePEc:bfr:banfra:987
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    File URL: https://www.banque-france.fr/system/files/2025-03/WP987.pdf
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    More about this item

    Keywords

    Wage Inequality; Worker Segregation; Occupational Sorting; Employer-Employee Data;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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