High Wage Workers and High Wage Firms

73 Pages Posted: 5 Sep 2000

See all articles by John M. Abowd

John M. Abowd

U.S. Census Bureau; Cornell University Department of Economics; Labor Dynamics Institute; School of Industrial and Labor Relations; NBER (on leave); CREST; IZA Institute of Labor Economics

Francis Kramarz

Independent

David N. Margolis

Centre d'Economie de la Sorbonne; IZA Institute of Labor Economics; World Bank - Social Protection Unit (HDNSP); Paris School of Economics (PSE)

Date Written: November 1994

Abstract

We study a longitudinal sample of over one million French workers and over 500,000 employing firms. Real total annual compensation per worker is decomposed into components related to observable characteristics, worker heterogeneity, firm heterogeneity and residual variation. Except for the residual, all components may be correlated in an arbitrary fashion. At the level of the individual, we find that person-effects, especially those not related to observables like education, are the most important source of wage variation in France. Firm-effects, while important, are not as important as person-effects. At the level of firms, we find that enterprises that hire high-wage workers are more productive but not more profitable. They are also more capital and high-skilled employee intensive. Enterprises that pay higher wages, controlling for person-effects, are more productive and more profitable. They are also more capital intensive but are not more high-skilled labor intensive. We also find that person-effects explain 92% of inter-industry wage differentials.

Suggested Citation

Abowd, John Maron and Kramarz, Francis and Margolis, David N., High Wage Workers and High Wage Firms (November 1994). NBER Working Paper No. w4917. Available at SSRN: https://ssrn.com/abstract=226606

John Maron Abowd (Contact Author)

U.S. Census Bureau ( email )

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NBER (on leave) ( email )

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IZA Institute of Labor Economics

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Francis Kramarz

Independent

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David N. Margolis

Centre d'Economie de la Sorbonne ( email )

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France
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(33-1) 44 07 82 47 (Fax)

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

World Bank - Social Protection Unit (HDNSP) ( email )

Human Development Network
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Paris School of Economics (PSE) ( email )

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France

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