Arbeitspapier

Reallocation and the Role of Firm Composition Effects on Aggregate Wage Dynamics

Aggregate wages display little cyclicality compared to what a standard model would predict. Wage rigidities are an obvious candidate but a recent strand of the literature has emphasized the need to take into account the growing importance of worker composition effects during downturns. With reference to the Italian case we document that also firm composition effects increasingly matter in explaining the aggregate wage dynamics, i.e. aggregate wage growth has been lifted up by the increase in the employment weight of high wage firms. To the extent that this reallocation occurs towards more productive firms, the composition effects may also reflect an efficiency enhancing mechanism. We use a newly available dataset based on social security records covering the universe of Italian employers be-tween 1990 and 2013 and employ a standard measure of allocative efficiency on wages paid across firms. We show that this measure has improved over time since prior to the recent downturn and that it is aligned, at the sectoral level, with measures of productivity growth and market openness to competition. We then focus on the recent downturn and find that large firms were able to adjust wages more than small firms, and that small firms instead adjusted employment to a larger extent. Finally, we document that the continued improvement in the measure of allocative efficiency over this period correlates positively with measures of economic activity (evolution of employment and value added) across sectors.

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 11313

Klassifikation
Wirtschaft
Allocative Efficiency; Cost-Benefit Analysis
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Thema
aggregate wage dynamics
reallocation
allocative efficiency
firm composition effects

Ereignis
Geistige Schöpfung
(wer)
Adamopoulou, Effrosyni (Efi)
Bobbio, Emmanuele
De Philippis, Marta
Giorgi, Federico
Ereignis
Veröffentlichung
(wer)
Institute of Labor Economics (IZA)
(wo)
Bonn
(wann)
2018

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Adamopoulou, Effrosyni (Efi)
  • Bobbio, Emmanuele
  • De Philippis, Marta
  • Giorgi, Federico
  • Institute of Labor Economics (IZA)

Entstanden

  • 2018

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