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Title: The Contribution of Dispersion across Plants to the Increase in US Earnings Dispersion
Citation Type: Miscellaneous
Publication Year: 2010
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Abstract: Using an extensive set of establishment and individual data, we estimate the extent to which thevariance of earnings among establishments increased in 1977-2002 and its contribution to theincreased dispersion of US earnings among individuals. We find that more than 70 percent of theincrease in the variance of earnings in this period occurred across establishments. More than twothirds of the growth in establishment wage dispersion arises from changes within detailedindustry and region. Two industries contributed disproportionately to earnings inequality.Business services accounted for a growing share of the total variance in log earnings acrossplants, while the increased variance in earnings in finance, insurance, and real estate accountedfor one-fifth of the growth in variance in the whole economy.Decomposing the increase in earnings among establishments between rising inequalityamong existing establishments and changes in inequality due to the earnings of establishmentsthat enter or exit the economy we find that the bulk of the increase occurred among existingestablishments. We reject explanations that attribute the increase in the variance amongestablishments to increased returns to human capital or increased sorting of observable skillsacross plants. The factor most closely related to the increased dispersion in earnings across plantsis the increase in the dispersion in labor productivity among plants. Evidence of rent sharing andof the growing importance of inter establishment wage dispersion run, given the decliningstrength of union, counter to the usual analysis of wage-setting in a competitive market.JEL Codes: J3; J31; D3 KeyWords:Wage inequality; productivity and wages
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Authors: Freeman, Richard; Barth, Erling; Davis, James C.; Bryson, Alex
Publisher: National Bureau for Economic Research
Data Collections: IPUMS USA
Topics: Other
Countries: United States