Wage Structure, Raises and Mobility: International Comparisons of the Structure of Wages within and Across Firms

64 Pages Posted: 24 Jul 2008

See all articles by Edward P. Lazear

Edward P. Lazear

Stanford Graduate School of Business; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Kathryn L. Shaw

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2007

Abstract

The returns to talent or performance have grown over time in developed countries. Is talent concentrated in a few firms or are firms virtual microcosms of the economy, each having close to identical distributions of talent? The data show that talent is not concentrated in a few companies, but is widely dispersed across companies. Wage dispersion within firms is nearly as high as the wage dispersion overall. The standard deviation of wages within the firm is about 80% of the standard deviation across all workers in the economy. Firms are more similar than they are dissimilar, but they are not identical: the firm mean wage displays considerable dispersion across the population of firms. There is evidence that talent is becoming more concentrated over time within some firms relative to others. In four countries that estimated wage regressions with firm fixed effects, the firm fixed effects are contributing more to the R-squared of the wage regression over time. Law firms have more lawyers than janitors. Janitorial firms have more janitors than lawyers and the differences between firms have become more pronounced. Still, the variance of wages within the average firms remains high.

JEL Classification: J01, J2, J24, J3, J31

Suggested Citation

Lazear, Edward P. and Shaw, Kathryn L., Wage Structure, Raises and Mobility: International Comparisons of the Structure of Wages within and Across Firms (November 2007). 2008 Industry Studies Conference Paper. Available at SSRN: https://ssrn.com/abstract=1175099 or http://dx.doi.org/10.2139/ssrn.1175099

Edward P. Lazear (Contact Author)

Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Kathryn L. Shaw

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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