Firm wage policies and inequality: Evidence using matched employer-employee data

Grant description:

This project seeks to better understand the set of implicit and explicit rules that govern pay-setting within companies and explore how these policies interact with market forces to shape the earnings distribution. Using matched employer-employee data from the Longitudinal Employer-Household Dynamics, the project will investigate the source of differences in wages being paid to similar workers at different establishments, after accounting for individual differences. The research will quantify how sensitive wages are to local labor market conditions, including policies, and will assess the extent of centralization of firms’ wage policies. Importantly, the research will assess whether firms’ concentration in the relevant labor market affects wage premia. The project generally aims to further our understanding of the role of labor market frictions and organizational factors in determining earnings inequality.