Template-Type: ReDIF-Paper 1.0

Author-Name: Paul Bingley
Author-X-Name-First: Paul
Author-X-Name-Last: Bingley

Author-Name: Lorenzo Cappellari
Author-X-Name-First: Lorenzo
Author-X-Name-Last: Cappellari
Author-Email: lorenzo.cappellari@unicatt.it
Author-Workplace-Name: Università Cattolica del Sacro Cuore
Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore



Title: Workers, Firms and Life-Cycle Wage Dynamics.


Abstract: Studies of individual wage dynamics typically ignore firm heterogeneity, whereas
decompositions of earnings into worker and firm effects abstract from life-cycle considerations.
We study firm effects in individual wage dynamics using administrative data on the population
of Italian employers and employees. We propose a novel identification strategy for firm-related
wage components exploiting the informative content of the wage covariance structure of coworkers.
Wage inequality increases three-fold over the working life; firm effects are
predominant while young, but sorting of workers into firms becomes increasingly important,
explaining the largest share of lifetime inequality. Static models that do not allow for life-cycle
dynamics underestimate the importance of sorting and overstate match and firm effects.
Length: 45
Creation-Date: 2018-03
File-URL: http://dipartimenti.unicatt.it/economia-finanza-def067.pdf
File-Format: Application/pdf
File-Function: First version, 2018
Number: def067
Classification-JEL: J24, J31. 
Keywords: Wage inequality, Wage dynamics, Co-workers’ covariance.
Handle: RePEc:ctc:serie1:def067