Firm and Labor Market Dynamics
Paper Session
Sunday, Jan. 5, 2025 1:00 PM - 3:00 PM (PST)
- Chair: Seula Kim, Pennsylvania State University
Employment Flexibility and Worker Movement within and between Firms
Abstract
Leveraging a Japanese plant-employee matched data, we document intriguing facts related to worker dynamics within and between Firms. We find that the average age (i.e., experience) of workers decreases with plant size. I.e., larger plants tend to hire younger workers. Paradoxically, we also document that average tenure of workers with the current employer actually increases with plant size. We substantiate an empirical mechanism that the age-tenure profile is much steeper for workers in larger plants, which implies that unproductive plants hire workers gradually over their life cycles while productive plants hire disproportionately more young workers and keep those who have successfully upgraded their human capital over their life cycles. We then build up an industry equilibrium model that can rationalize the above empirical findings and deliver different hiring/firing strategies between plants. Finally, we simulate the model and find a strong distributional impact of imposing a firing cost that is uniform across firms and workers. In particular, the wages of young workers (especially those with low human capital) are negatively affected by the firing cost, while some old workers can actually gain from the firing cost.Firms as Learning Environments: Implications for Earnings Dynamics and Job Search
Abstract
This paper demonstrates that heterogeneity in firms’ promotion of human capital accumulation is an important determinant of life-cycle earnings inequality. To arrive at this finding, I develop a life-cycle search model with heterogeneous workers and firms. In the model, a worker’s earnings can grow through both human capital accumulation and labor market competition channels. Human capital growth depends on both the worker’s ability and the firm’s learning environment. I apply the model to administrative micro data from Germany. While bringing the model to the data, I find evidence of substantial variation in human capital growth across establishments that is also related to establishment characteristics designed to encourage learning. I find that heterogeneity in firm learning environments accounts for 40% of the increase in the cross-sectional earnings variance over the life cycle, and that this mechanism is especially important for young workers.Heterogeneity in Wage and Firm Dynamics: The Role of Worker Job Prospects
Abstract
This paper studies the heterogeneity in firm dynamics across different industries, regions, and business cycles through the lens of worker beliefs and prospects about firms. Using administrative employee- mployer linked data, I reveal several key findings of the wage and firm dynamics in different environments, which are consistent with workers' learning mechanism in Kim (2023): i) young firms on average pay less compared to mature firms, but once controlling for observable firm characteristics they pay more on average, ii) controlling for observable firm characteristics, high (low)-performing young firms pay more (less) than equally high (low)-performing mature counterparts, iii) the wage differentials are negatively correlated with firm hiring and growth, iv) they are more pronounced in uncertain industries or recession periods in which young firm activities are less dynamic, and v) associated with industrial heterogeneity or procyclical patterns of young firm growth and business dynamism. These findings shed new light on firm dynamics in the interplay between worker job prospects and wage dynamics, and carry important policy implications for firm employment and growth.Discussant(s)
Cheng Chen
,
Clemson University
Victoria Gregory
,
Federal Reserve Bank of St. Louis
Seula Kim
,
Pennsylvania State University
Sadhika Bagga
,
University of Rochester
JEL Classifications
- E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
- J2 - Demand and Supply of Labor