Publication Date: April 2019
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; ﬁrm-speciﬁc temporary shocks mostly aﬀect the low-skilled. 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 accounting for 44% of cross-sectional variance by age 55.
Keywords: Earnings dynamics, Inequality, Earnings dispersion, Rent sharing, Matched employer-employee data, competition in labor markets, Lifecycle wage growth, Lifecycle wage dispersion
JEL Classification Codes: J24 J31, J62, J63, J64