Journal of Economic Literature (JEL) Code(s)
J24 J31, J62, J63, J64
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.
Friedrich, Benjamin; Laun, Lisa; Meghir, Costas; and Pistaferri, Luigi, "Earnings Dynamics and Firm-Level Shocks" (2019). Cowles Foundation Discussion Papers. 82.