Abstract
This paper shows that wage profiles become similar to expenditure profiles and exhibit similar variations if the firm plays the roles of financial institutions and/or government when the latter institutions do not function perfectly for workers. Wage profiles slope upwards because of intergenerational transfers among the firm's workers reflecting their preferences over life‐cycle consumption. Variations arise when there are generational differences in consumption because of the firm's absorption of risk concerning the price of consumption goods or because of intergenerational risk‐sharing. The shape of the wage profile is affected by how well other institutions function.
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