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Internal and External Labor Markets: An Analysis of Matched Longitudinal Employer-Employee Data

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  • John M. Abowd
  • Francis Kramarz
Abstract
We decompose the real annual full time compensation costs of 1.1 million French workers followed over 12 years into a part that reflects their external opportunity wage and a part that reflects their internal wage rate. Using these components of compensation we investigate the extent to which firm-size wage differentials and inter-industry wage differentials are due to variability in the external wage (person effects) versus variability in the internal wage (firm effects). For France, we find that most of the firm-size wage effect and most of the inter-industry wage effect is due to person effects differences in the external wage rates.

Suggested Citation

  • John M. Abowd & Francis Kramarz, 1997. "Internal and External Labor Markets: An Analysis of Matched Longitudinal Employer-Employee Data," NBER Working Papers 6109, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6109
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    References listed on IDEAS

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    1. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    2. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
    3. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    4. Cain, Glen G, 1976. "The Challenge of Segmented Labor Market Theories to Orthodox Theory: A Survey," Journal of Economic Literature, American Economic Association, vol. 14(4), pages 1215-1257, December.
    5. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    6. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602, Elsevier.
    7. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
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    Cited by:

    1. Beatriz Muriel, 2011. "Rethinking Earnings Determinants in the Urban Areas of Bolivia," Development Research Working Paper Series 06/2011, Institute for Advanced Development Studies.
    2. Beatriz Muriel Hernández, 2016. "An Analysis of Firm Characteristics as Earnings Determinants: The Urban Bolivia Case," Development Research Working Paper Series 04/2016, Institute for Advanced Development Studies.
    3. repec:eee:labchp:v:3:y:1999:i:pb:p:2629-2710 is not listed on IDEAS

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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