Downloads
WP202133-Earnings-dynamics-and-firm-level-shocks.pdf
PDF | 928.59 KB
We use matched employer-employee data from Sweden to study the role of the firm in affecting the stochastic properties of wages. Our model accounts for endogenous participation and mobility decisions. We find that firm-specific permanent productivity shocks transmit to individual wages, but the effect is mostly concentrated among the high-skilled workers. For low-skilled the pass-through is similar for temporary and permanent firm-level shocks and the magnitude smaller. The updates to worker-firm specific match effects over the life of a firm-worker relationship are small. Substantial growth in earnings variance over the life cycle for high-skilled workers is driven by firms. In particular, cross-sectional wage variances by age 55 are roughly one-third higher relative to a scenario with no pass-through of firm shocks onto wages.
Authors
Research Fellow Yale University
Costas is a Research Fellow of the IFS and a Professor of Economics at Yale University and a Visiting Professor at University College London.
Stanford University
Lisa Laun
Benjamin Friedrich
Working Paper details
- DOI
- 10.1920/wp.ifs.2021.3321
- Publisher
- Institute for Fiscal Studies
Suggested citation
Friedrich, B et al. (2021). Earnings dynamics and firm-level shocks. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/earnings-dynamics-and-firm-level-shocks (accessed: 29 March 2024).
More from IFS
Understand this issue
Big firm, little firm: are differences between companies driving inequality and holding back growth?
30 August 2023
Behind the numbers: reassessing investment in skills and training
12 October 2023
Still a man’s world? Gender inequalities, parenthood and the workplace
23 August 2023
Policy analysis
Recent trends in public sector pay
26 March 2024
Gap between higher- and lower-paid public sector workers falls by more than a third since 2007 as doctors and experienced teachers have faced unprecedented pay cuts
26 March 2024
Sliding education results and high inequalities should prompt big rethink in Welsh education policy
21 March 2024
Academic research
Social skills and the individual wage growth of less educated workers
27 March 2024
The menopause "penalty"
18 March 2024
Household responses to trade shocks
26 March 2024