The distribution of income, the rate of pay raises, and the mobility of employees is crucial to understanding labor economics. Although research abounds on the distribution of wages across individuals in the economy, wage differentials within firms remain a mystery to economists. The first effort to examine linked employer-employee data across countries, The Structure of Wages:An International Comparison analyzes labor trends and their institutional background in the United States and eight European countries. A distinguished team of contributors reveal how a rising wage variance rewards star employees at a higher rate than ever before, how talent becomes concentrated in a few firms over time, and how outside market conditions affect wages in the twenty-first century. From a comparative perspective that examines wage and income differences within and between countries such as Denmark, Italy, and the Netherlands, this volume will be required reading for economists and those working in industrial organization.

This paper provides the first systematic study of how minimum wage policies in China affect firm employment over the 2000-2007 periods. Using a novel dataset of minimum wage regulations across more than 2,800 counties matched with firm-level data, we investigate both the effect of the minimum wage and its policy enforcement tightening in 2004. A dynamic panel (difference GMM) estimator is combined with a “neighbor-pairs-approach” to control for unobservable heterogeneity common to “border counties” that are subject to different minimum wage changes. We show that minimum wage increases have a significant negative impact on employment, with an estimated elasticity of -0.1. Furthermore, we find a heterogeneous effect of the minimum wage on employment which depends on the firm's wage level. Specifically, the minimum wage has a greater negative impact on employment in low-wage firms than in high-wage firms. Our results are robust for different treatment groups, sample attrition correction, and placebo tests.

A theoretical and empirical examination of wage differentials findsthat traditional theories of competition do not explain why workers with identical skills are paid differently.

Even though firms play a key role in shaping wages, wage inequality and the gender wage gap, firms have so far only featured to a limited extent in the policy debates around these issues. The evidence in this volume shows that around one third of overall wage inequality can be explained by gaps in pay between firms rather than differences in the level and returns to workers’ skills.

This volume seeks to go beyond the microeconomic view of wages as a cost having negative consequences on a given firm, to consider the positive macroeconomic dynamics associated with wages as a major component of aggregate demand.

This dissertation develops a novel model of wage determination in frictional labor markets, based on the personnel economics notion of "firm-wage policy." The first micro implication of the model is that if co-workers can observe each other's pay, the wage of old and new cohorts of workers within a firm is positively correlated. Secondly, the model implies that a firm-wage does respond to persistent productivity shocks, but is unchanged in the face of high-frequency productivity fluctuations. At the macro level, this wage determination model creates a powerful amplification mechanism from small aggregate shocks to productivity into large unemployment and vacancy fluctuations.