Firms, Skills, and Wage Inequality

66 Pages Posted: 25 May 2017 Last revised: 21 Apr 2019

See all articles by Roberto Pinheiro

Roberto Pinheiro

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Murat Tasci

Federal Reserve Bank of Cleveland

Date Written: april 19, 2019

Abstract

We present a model with search frictions and heterogeneous agents that allows us to decompose the overall increase in US wage inequality in the last 30 years into its within- and between-firm and skill components. We calibrate the model to evaluate how much of the overall rise in wage inequality and its components is explained by different channels. Output distribution per firm-skill pair more than accounts for the observed increase over this period. Parametric identification implies that the worker-specific component is responsible for 85 percent of this, compared to 15 percent that is attributable to firm-level productivity shifts

Keywords: Multi-agent firms, skill distributions, wage inequality

JEL Classification: D02, D21, J2, J3

Suggested Citation

Pinheiro, Roberto and Tasci, Murat, Firms, Skills, and Wage Inequality (april 19, 2019). FRB of Cleveland Working Paper No. 17-06R. Available at SSRN: https://ssrn.com/abstract=2973972 or http://dx.doi.org/10.2139/ssrn.2973972

Roberto Pinheiro (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Murat Tasci

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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