Publications
The Disappearing Large-Firm Wage Premium
(with Nicholas Bloom, Fatih Guvenen, Jae Song, and Till von Wachter)
AEA Papers and Proceedings, May 2018
Large firms have paid significantly higher wages for over a century. Based on administrative data we document that the large-firm wage premium (LFWP) has declined steadily over the last thirty years. Decomposing pay into worker and firm fixed effects, we then document that the LFWP can be largely explained by a rise in firm effects with firm size. The dramatic decline is due a reduction in these firm effects at large firms. These changes have been concentrated at very large employers. In contrast, worker composition has changed little. We also find the majority of the change occurs within industries.
(with Nicholas Bloom, Fatih Guvenen, Jae Song, and Till von Wachter)
AEA Papers and Proceedings, May 2018
Large firms have paid significantly higher wages for over a century. Based on administrative data we document that the large-firm wage premium (LFWP) has declined steadily over the last thirty years. Decomposing pay into worker and firm fixed effects, we then document that the LFWP can be largely explained by a rise in firm effects with firm size. The dramatic decline is due a reduction in these firm effects at large firms. These changes have been concentrated at very large employers. In contrast, worker composition has changed little. We also find the majority of the change occurs within industries.
Working Papers
The Role of Labor Market Entry and Exports in Sorting: Evidence from West Germany
The sorting of high-wage workers to high-wage firms accounts for a substantial share of rising wage inequality. Yet, little is known about which worker flows most contribute to sorting or what economic mechanisms have lead to its rise. I make three contributions toward answering these questions. First, to understand how sorting intensifies, I develop a novel decomposition method to measure the relative importance of different worker flow channels. I find that labor market entry of young workers is the dominant sorting channel--accounting for about half of the total rise in sorting--while job-to-job transitions play a more limited role. Second, to understand why sorting is rising, I use exogenous variation in West German trade exposure to estimate the effect of trade liberalization on changes in sorting within local labor markets. Export exposure produces a large, positive effect on sorting and can account for 14% of the total rise in sorting between 1985 and 2009. Third, I apply the worker flow decomposition method to exogenous, export-induced changes in employment. Holding worker composition constant, I confirm that labor market entrants account for about half of rising sorting.
The Effects of Employment Shocks on the Self-Employed: Evidence from Natural Experiments in Professional Golf
Temporary employment shocks have been shown to have persistent effects on workers’ earnings. I study employment shocks in professional golf to better understand the mechanisms and dynamics behind these effects. The world’s top professional golf tour, the PGA TOUR, offers annual membership through two separate tournaments which include sharp treatment thresholds allowing for the application of regression discontinuity designs to estimate the long term effects of temporary employment shocks. I
find large initial earnings increases of 156 and 90 percent in first year after the Q School and Web.com Tour Money List experiments, respectively. However, these effects quickly dissipate and there is no effect on productivity. To explain these results, I find that marginal PGA TOUR members have lower job stability (i.e. they exit to lower tours at high rates) when compared with a typical worker in the general labor market. These high exit rates likely explain the differences in the persistence of earnings losses in golf versus a broader labor market context. Applying this result to the general labor market suggests that the stability of employer-employee matches may contribute to the persistence of job displacement losses.
Earnings Growth, Job Mobility, and Inequality from 1957 to 2014
(with Jae Song and Till von Wachter)
Using data on workers employment and earnings spanning the period from 1957 to 2014 we show that during the early career job mobility is high and returns to job mobility comprise a substantial component of earnings growth. Exploiting the length of the data set, we document remarkable stability in the career process once cyclical variation is accounted for. Exploiting information on employers available in the data, we further show that the return to job mobility is fully accounted for by changes in firm average pay, suggesting that workers move to better firms rather than better idiosyncratic matches. We then use the data to contrast job mobility patterns for low- and high-wage workers, and relate these differences to recent increases in earnings inequality.
The sorting of high-wage workers to high-wage firms accounts for a substantial share of rising wage inequality. Yet, little is known about which worker flows most contribute to sorting or what economic mechanisms have lead to its rise. I make three contributions toward answering these questions. First, to understand how sorting intensifies, I develop a novel decomposition method to measure the relative importance of different worker flow channels. I find that labor market entry of young workers is the dominant sorting channel--accounting for about half of the total rise in sorting--while job-to-job transitions play a more limited role. Second, to understand why sorting is rising, I use exogenous variation in West German trade exposure to estimate the effect of trade liberalization on changes in sorting within local labor markets. Export exposure produces a large, positive effect on sorting and can account for 14% of the total rise in sorting between 1985 and 2009. Third, I apply the worker flow decomposition method to exogenous, export-induced changes in employment. Holding worker composition constant, I confirm that labor market entrants account for about half of rising sorting.
The Effects of Employment Shocks on the Self-Employed: Evidence from Natural Experiments in Professional Golf
Temporary employment shocks have been shown to have persistent effects on workers’ earnings. I study employment shocks in professional golf to better understand the mechanisms and dynamics behind these effects. The world’s top professional golf tour, the PGA TOUR, offers annual membership through two separate tournaments which include sharp treatment thresholds allowing for the application of regression discontinuity designs to estimate the long term effects of temporary employment shocks. I
find large initial earnings increases of 156 and 90 percent in first year after the Q School and Web.com Tour Money List experiments, respectively. However, these effects quickly dissipate and there is no effect on productivity. To explain these results, I find that marginal PGA TOUR members have lower job stability (i.e. they exit to lower tours at high rates) when compared with a typical worker in the general labor market. These high exit rates likely explain the differences in the persistence of earnings losses in golf versus a broader labor market context. Applying this result to the general labor market suggests that the stability of employer-employee matches may contribute to the persistence of job displacement losses.
Earnings Growth, Job Mobility, and Inequality from 1957 to 2014
(with Jae Song and Till von Wachter)
Using data on workers employment and earnings spanning the period from 1957 to 2014 we show that during the early career job mobility is high and returns to job mobility comprise a substantial component of earnings growth. Exploiting the length of the data set, we document remarkable stability in the career process once cyclical variation is accounted for. Exploiting information on employers available in the data, we further show that the return to job mobility is fully accounted for by changes in firm average pay, suggesting that workers move to better firms rather than better idiosyncratic matches. We then use the data to contrast job mobility patterns for low- and high-wage workers, and relate these differences to recent increases in earnings inequality.