It's Where You Work: Increases in Earnings Dispersion Across Establishments and Individuals in the U.S

40 Pages Posted: 8 Sep 2014 Last revised: 29 Sep 2014

See all articles by Erling Barth

Erling Barth

Institute for Social Research, Norway; Department of Economics, University of Oslo; IZA Institute of Labor Economics

Alex Bryson

UCL; National Institute of Economic and Social Research (NIESR)

James C. Davis

US Census Bureau

Richard B. Freeman

National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

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Date Written: September 2014

Abstract

This paper links data on establishments and individuals to analyze the role of establishments in the increase in inequality that has become a central topic in economic analysis and policy debate. It decomposes changes in the variance of ln earnings among individuals into the part due to changes in earnings among establishments and the part due to changes in earnings within-establishments and finds that much of the 1970s-2010s increase in earnings inequality results from increased dispersion of the earnings among the establishments where individuals work. It also shows that the divergence of establishment earnings occurred within and across industries and was associated with increased variance of revenues per worker. Our results direct attention to the fundamental role of establishment-level pay setting and economic adjustments in earnings inequality.

Suggested Citation

Barth, Erling and Bryson, Alex and Davis, James C. and Freeman, Richard B., It's Where You Work: Increases in Earnings Dispersion Across Establishments and Individuals in the U.S (September 2014). NBER Working Paper No. w20447, Available at SSRN: https://ssrn.com/abstract=2492959

Erling Barth (Contact Author)

Institute for Social Research, Norway ( email )

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Department of Economics, University of Oslo ( email )

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Alex Bryson

UCL ( email )

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James C. Davis

US Census Bureau ( email )

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Richard B. Freeman

National Bureau of Economic Research (NBER) ( email )

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