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Between Firm Changes in Earnings Inequality: The Dominant Role of Industry Effects

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  • John C. Haltiwanger
  • James R. Spletzer

Abstract

We find that most of the rising between firm earnings inequality that dominates the overall increase in inequality in the U.S. is accounted for by industry effects. These industry effects stem from rising inter-industry earnings differentials and not from changing distribution of employment across industries. We also find the rising inter-industry earnings differentials are almost completely accounted for by occupation effects. These results link together the key findings from separate components of the recent literature: one focuses on firm effects and the other on occupation effects. The link via industry effects challenges conventional wisdom.

Suggested Citation

  • John C. Haltiwanger & James R. Spletzer, 2020. "Between Firm Changes in Earnings Inequality: The Dominant Role of Industry Effects," NBER Working Papers 26786, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26786
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    Cited by:

    1. Haltiwanger, John C. & Hyatt, Henry R. & Spletzer, James R., 2022. "Industries, Mega Firms, and Increasing Inequality," IZA Discussion Papers 15197, Institute of Labor Economics (IZA).
    2. Freund, L. B., 2022. "Superstar Teams: The Micro Origins and Macro Implications of Coworker Complementarities," Cambridge Working Papers in Economics 2276, Faculty of Economics, University of Cambridge.
    3. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    4. N. M. Rozanova, 2021. "Methodological Issues of Modern Competition Policy," Studies on Russian Economic Development, Springer, vol. 32(5), pages 492-498, September.
    5. John Haltiwanger & James R. Spletzer, 2021. "Rising Between-Firm Inequality and Declining Labor Market Fluidity: Evidence of a Changing Job Ladder," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 45-67, National Bureau of Economic Research, Inc.
    6. Leila Gautham & Nancy Folbre & Kristin Smith, 2024. "Earnings inequality and the expansion of care services in the United States, 1985–2019," Industrial Relations Journal, Wiley Blackwell, vol. 55(2), pages 119-140, March.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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