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Decomposing the large firm wage premium in Germany

Author

Listed:
  • Lochner, Benjamin

    (Institute for Employment Research (IAB), Nuremberg, Germany ; University of Nuremberg)

  • Seth, Stefan

    (Institute for Employment Research (IAB), Nuremberg, Germany)

  • Wolter, Stefanie

    (Institute for Employment Research (IAB), Nuremberg, Germany)

Abstract
"We use an extensive, matched employer-employee dataset to analyze the employer-size wage relation and its contribution to wage inequality in Germany. Applying models with additive fixed effects for workers and establishments, we document that the large firm wage premium, which has risen over 25 years, has only recently started to decrease. Our estimates show that the recent decline is due to a decrease in the variation of establishment-specific wage premiums both across establishment size groups and within. This decline together with decreasing worker segregation at small firms account for an overall reversal in the trend of increasing wage dispersion." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Lochner, Benjamin & Seth, Stefan & Wolter, Stefanie, 2020. "Decomposing the large firm wage premium in Germany," IAB-Discussion Paper 202010, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:202010
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    References listed on IDEAS

    as
    1. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
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    6. Emanuele Colonnelli & Joacim Tåg & Michael Webb & Stefanie Wolter, 2018. "A Cross-Country Comparison of Dynamics in the Large Firm Wage Premium," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 323-327, May.
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    8. Oberfichtner Michael & Schnabel Claus, 2019. "The German Model of Industrial Relations: (Where) Does It Still Exist?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(1), pages 5-37, January.
    9. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 843-881.
    10. Katarína Borovičková & Robert Shimer, 2017. "High Wage Workers Work for High Wage Firms," NBER Working Papers 24074, National Bureau of Economic Research, Inc.
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    12. Oberfichtner Michael & Schnabel Claus, 2019. "The German Model of Industrial Relations: (Where) Does It Still Exist?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(1), pages 5-37, January.
    13. Nicholas Bloom & Fatih Guvenen & Benjamin S. Smith & Jae Song & Till von Wachter, 2018. "The Disappearing Large-Firm Wage Premium," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 317-322, May.
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    Citations

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    Cited by:

    1. Benjamin Lochner & Bastian Schulz, 2024. "Firm Productivity, Wages, and Sorting," Journal of Labor Economics, University of Chicago Press, vol. 42(1), pages 85-119.
    2. Moritz Drechsel‐Grau & Andreas Peichl & Kai D. Schmid & Johannes F. Schmieder & Hannes Walz & Stefanie Wolter, 2022. "Inequality and income dynamics in Germany," Quantitative Economics, Econometric Society, vol. 13(4), pages 1593-1635, November.
    3. Kovalenko, Tim & Sauerbier, Timo & Schröpf, Benedikt, 2024. "The fall and rebound of average establishment size in West Germany," Discussion Papers 11/2024, Deutsche Bundesbank.
    4. Bossler, Mario & Gürtzgen, Nicole & Kubis, Alexander & Küfner, Benjamin & Lochner, Benjamin, 2020. "The IAB Job Vacancy Survey: design and research potential," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 54(1), pages 1-13.
    5. Bias, Daniel & Chen, Lin & Lochner, Benjamin & Schmid, Thomas, 2020. "Measuring workers' financial incentives," FAU Discussion Papers in Economics 07/2020, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    6. Kovalenko, Tim & Sauerbier, Timo & Schröpf, Benedikt, 2023. "The fall and rebound of average establishment size in West Germany," Discussion Papers 126, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    7. Pawe{l} Gola & Yuejun Zhao, 2024. "A Firm Link: Overall, Between- and Within-Firm Inequality Through the Lens of a Sorting Model," Papers 2410.11532, arXiv.org.

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    More about this item

    Keywords

    Bundesrepublik Deutschland ; Auswirkungen ; Betriebsgröße ; Einkommenseffekte ; Großbetrieb ; Kleinbetrieb ; Lohnentwicklung ; Lohnunterschied ; Mittelbetrieb ; IAB-Datensatz Linked Personnel Panel ; Unternehmensgröße ; 1985-2017;
    All these keywords.

    JEL classification:

    • J00 - Labor and Demographic Economics - - General - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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