Matched Employer-employee Data Research Articles

Market power and wages: evidence from Brazil

PurposeThe paper examines the impact of market power on wages within the context of a developing country, focusing on Brazil.Design/methodology/approachWith access to matched employer–employee data from Brazil, we first characterized the evolution of the local labor market concentration (Municipality Herfindahl–Hirschman Index [HHI]). Then, we built a fixed-effect model with instrumental variables to verify the association between the local labor market concentration and wages. Finally, a difference-in-difference (DiD) was implemented to verify whether a merger transaction impacted the workers’ earnings in the Brazilian banking sector.FindingsThe paper’s findings suggest that there may be a negative relationship between market power and workers’ earnings.Originality/valueThis research conducted an in-depth investigation of the labor market power in a developing country. As far as we know, our work is the first to evaluate the extension of local concentration in Brazilian formal labor markets and to illustrate its evolution over the last decades. Additionally, when going through the effects of market concentration on wages, we use a new identification strategy that explores changes in the HHI that are caused by national trends in an industry as a source of exogenous variation. Finally, the last part of the paper assesses the effects of antitrust policy on the labor market, a kind of investigation that is still scarce.

Expansions in paid parental leave and mothers’ economic progress

This paper investigates the impact of reforms extending paid parental leave on mothers’ progress to the upper echelons of their companies. Using employer–employee matched data and examining a series of reforms between 1987 and 2005 in Norway, we find that longer parental leave neither helped nor hurt mothers’ chances to be at the top of their companies’ pay ranking or in the C-suite up to 25 years after childbirth. This holds true also for highly educated women and high performers across all sectors. Key career determinants, such as hours worked and promotions, are unaffected in the short and long run. Finally, fathers’ career progression and within-household gender wage gaps have also remained unaltered.

When inequality means equity: horizontal wage dispersion and the propensity to leave current employment across different organizational settings

Abstract Extant research holds that horizontal wage dispersion (i.e., wage dispersion within a hierarchical level in a firm) induces employees to leave their employment. Based on social comparison theory, we nuance this by theoretically and empirically uncovering contingencies under which horizontal wage dispersion is associated with employees staying in their current employment. Specifically, we focus on firm size and decentralization as relevant organizational contingencies. In large as opposed to small firms, employees’ productivity may vary significantly within hierarchical levels, causing employees to consider high horizontal wage dispersion as equitable. In decentralized firms, there is more delegation of responsibilities to employees at lower levels in the hierarchy, creating more room for individual differentiation in terms of contributions and thus legitimizing horizontal wage dispersion. Our empirical analysis based on matched employer–employee data from Denmark strongly supports our predictions. Our study reveals the organizational contingencies where horizontal wage dispersion can be used as a retention tool.

The Temptation of Social Networks under Job Search Frictions

Abstract This paper presents descriptive evidence that although social networks are helpful to find jobs, the jobs found through social networks tend to be mismatched. The paper uses nationally representative matched employer–employee data in Bangladesh that include direct measures of match quality. Less educated and seemingly poorer workers are more likely to have found their jobs through social networks. Compared to workers at the same occupation level in the same firm who were matched through formal channels, those matched through social networks found their jobs quicker but have lower match quality and earn less. The mechanism, suggested by a theoretical model, is as follows: even when social networks are connected to mismatched jobs, workers can be tempted to use social networks to find mismatched jobs for fear of finding nothing. This temptation is stronger for less skilled and poorer workers, because costly formal channels are less rewarding and affordable for them.

Making their own weather? Estimating employer labour-market power and its wage effects

The subdued wage growth observed in many countries has spurred interest in monopsony views of regional labour markets. This study measures the extent and robustness of employer power and its wage implications exploiting comprehensive matched employer–employee data. We find average (employment-weighted) Herfindhal indices of 800 to 1,100, stable over the 1986–2019 period covered, and that typically less than 8% of workers are exposed to concentration levels thought to raise market power concerns. When controlling for both worker and firm heterogeneity and instrumenting for concentration, we find that wages are negatively affected by employer concentration, with elasticities of around −1.4%. We also find that several methodological choices can change significantly both the measurement of concentration and its wage effects.

Early Joiners and Startup Performance

Abstract We show that early joiners—non-founder employees in the first year of a startup—play a critical role in shaping firm performance. We use administrative employer-employee matched data on US startups and utilize premature death as a natural experiment that exogenously separates talent from startups. We find that losing an early joiner has large negative effects on employment and revenues that persist for at least ten years. In contrast, losing a later joiner yields only a small and temporary decline in firm performance. Our results imply that organization capital, an important driver of startup success, is embodied in early joiners.

Creating a safer workplace: A linkage model for labour‒management partnership, psychological safety, collaborative industrial relations climate and organisational occupational and health safety performance

This study takes a mutual gains perspective to investigate how a labour‒management partnership (LMP) impacts organisational occupational and health safety (OHS) performance and creates a safe workplace. It develops a model linking employee psychological safety with a collaborative industrial relations (IR) climate and ultimately organisational OHS performance. The research context is China ‒ where LMP is driven by the Party-state in managing labour relations. To test the proposed linkage model, multi-level structural equation modelling is conducted, using matched employer‒employee data from 205 companies and 7229 employees in an industrial park in the Yangtze River Delta. The results support the use of the linkage model, demonstrating that partnership decision-making increases psychological safety, in turn developing a collaborative IR climate, ultimately reducing the number of accidents. This study contributes to partnership research by exploring the underlying mechanisms of how a partnership arising from the logic of neo-pluralism successfully delivers mutual gains for employees and employers in a non-pluralist context. It has wider implications for collaborative management and OHS management in a developing country.

Decomposing the effect of trade on the gender wage gap

AbstractThis paper uses variation in exposure to increased Chinese imports in Brazil to investigate the impact of trade on gender wage inequality. First, using Brazilian census data, we find that rising imports reduced the gender wage gap in Brazilian local labour markets. Next, using Oaxaca–Blinder decompositions, we show that this reduction in the wage gap was largely explained by trade increasing the share of female workers in higher‐paying occupations. Finally, we use a matched employer–employee data set to investigate how individual workers adjust to the trade shock. Similar to the local labour market analysis, we find that male workers exposed to increased import competition saw a larger decline in both wages and cumulative earnings relative to female workers. In addition, we uncover an interesting asymmetry in that, while male workers exhibited much higher degrees of industry mobility in response to the trade shock, female workers exhibited an equal if not higher degree of occupational mobility.

The Impact of Restricting Labor Mobility on Corporate Investment and Entrepreneurship

Abstract This paper examines how labor mobility restrictions like noncompete agreements affect firms’ investment decisions. Using matched employee-employer data from LinkedIn, I show that increases in the enforceability of noncompete agreements lead to widespread declines in employee departures, specifically in knowledge-intensive occupations. Established firms that rely more on these knowledge-intensive occupations increase their investment rate in physical capital. However, new firm entry in corresponding sectors declines. I provide evidence for different mechanisms to explain these patterns. Together, the findings show that labor frictions play an important role in investment decisions. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Between voluntarism and compulsion: Membership in mutual health insurance societies in Swedish manufacturing, c. 1900

AbstractMembership in mutual health insurance societies spread among industrial workers in the late nineteenth century. We study determinants of such membership among male workers in Swedish manufacturing by using matched employer–employee data from three industries covering all workers (i.e. members and non‐members, N > 12 000) and firms around 1900. We find remarkably high rates of membership overall, and especially among married workers. The association between marital status and health insurance suggests that selection into health insurance societies was ‘propitious’ rather than ‘adverse’. Many workers became members well before the age of 40 years, when their health began to deteriorate, and this coincided with the average age of first marriage for men, occurring in their late twenties. Being married and having membership was more marked in firms with voluntary membership and was important for the viability of the mix of voluntary and compulsory health insurance societies emerging in Nordic countries around 1900. Findings support the idea that health insurance can attract high levels of membership under voluntary schemes and suggest why it took so long before statutory health insurance covering sickness absence and workplace accidents was introduced in Sweden.

Are working hours complements in production?

This paper studies the degree of complementarity in working hours among coworkers in production. Using matched employer-employee data, we first present facts on the within-establishment relationship between wages and hours worked that are consistent with the presence of complementarities in working hours. Next, we estimate the elasticity of substitution in working hours and find it to be 0.69 in the aggregate and between 0.52 and 1.03 across industries. We validate our elasticity estimates by showing that industries with higher elasticities exhibit greater flexibility in hours. Our results suggest that working hours are gross complements in production rather than perfect substitutes, as is typically assumed. An accounting exercise using our model estimations suggests that hours-wage penalties, due to complementarities in hours, can explain 5 to 30 percent of the gender wage gap over the life-cycle.

The gender wage gap across the wage distribution: Evidence in tourism at the sectoral level

We conducted a comparative study of the main determinants of the gender wage gap across the wage distribution in the tourism sector from a sectoral perspective. Using matched employer-employee data from Spain, we propose different wage decompositions across the wage distribution based on unconditional quantile regressions. In feminised sectors, such as hospitality and travel agencies, the gender wage gap follows an increasing trend across the wage distribution, whereas in masculinised sectors, such as transportation, the gap follows a decreasing trend, becoming non-significant at the highest wage levels. Except in the case of transportation, gender wage discrimination increases as wages increase and is the component that explains the major part of this gap. The results show that there are differential barriers to the promotion of women at a sectoral level that perpetuate gender roles, particularly in positions of high responsibility.

Incidence and Performance of Spinouts and Incumbent New Establishments: Role of Selection and Redeployability within Parent Firms.

Using matched employer-employee data from 30 U.S. states covering a wide range of industries, we compare spinouts with new establishments formed by incumbents (INEs). We propose a selection-based framework comprising idea selection by parents to internally implement ideas as INEs, entrepreneurial selection by founders to form spinouts, and exit selection to close ventures. Consistent with parents choosing better ideas in the idea selection stage, we find that INEs perform relatively better than spinouts, and more so with larger parents. Regarding the entrepreneurial selection stage, we find evidence consistent with resource requirements being a greater entry barrier to spinouts. Parents' resource redeployment opportunities are associated with lower relative survival of INEs, consistent with their being subject to greater selection pressures in the exit selection stage. Spinouts, or new ventures started by employees leaving a parent firm, have received special attention because spinouts tend to outperform other types of new firms. This superior performance is typically attributed to the better knowledge and higher-quality ideas developed by founders at the parent firms. However, parent firms can also select and implement such ideas internally, particularly if they are good quality ideas. We compare spinouts with new establishments formed within parent firms and find that consistent with such a process of selection, the latter outperform spinouts, more so in the case of larger parents. Interestingly, new establishments of parent firms tend to close at a greater rate than spinouts, consistent with parent firms being able to redeploy resources elsewhere within their firms.

Trade Unions and the Process of Technological Change

We investigate how trade unions influence the process of technological change at the workplace level. Using matched employer-employee data, comprising all Norwegian workplaces and working individuals in the period 2000-2014, we exploit exogeneous changes in the tax rules for union members to identify how changes in unionization rates affect the structural composition of occupations within workplaces. Making a distinction between routine and non-routine workers, based on their estimated probabilities of being replaced by automation technologies, we show how labor unions contribute to raising the relative wage of routine workers over non-routine workers. As routine workers on average have lower earnings than non-routine workers, unions thereby contribute to compress wages at the workplace level. The direct implication of this policy is shown to reduce the relative demand for routine workers over non-routine workers in unionized establishments. However, our results also suggest that unions influence the relative demand for routine workers, conditional on relative wages. Our findings thus give some support to bargaining theories where unions force firms off their demand curves.

The Motherhood Wage Penalty and Female Entrepreneurship

The need to resolve work–family conflict has long been considered a central motive for women’s pursuit of entrepreneurship. In this paper, we propose and empirically uncover a novel mechanism driving female entrepreneurship: reduced earnings opportunities in wage employment due to motherhood status. Combining insights from career mobility research and the motherhood penalty literature, we propose that women who become mothers will disproportionately launch a new business to reduce the motherhood penalty they would otherwise incur in wage work due to employer discrimination. We further predict that this tendency to launch a new venture will be more pronounced for women who occupy high-paying or managerial positions, given the higher opportunity cost of staying in wage work and the higher potential payoffs from entrepreneurship that accrue mothers occupying such positions. Using matched employer–employee data from Sweden that distinguish new-venture founding from self-employment, we find support for our arguments. Overall, this study sheds light on the two antecedents of female entrepreneurship and contributes to a more thorough understanding of what motivates women to pursue irregular and atypical careers, such as entrepreneurship. Funding: This work was supported by the Ewing Marion Kauffman Foundation (Ewing Marion Kauffman Junior Faculty Fellowship) and the Wharton Dean’s Research Fund. Supplemental Material: The e-companion is available at https://doi.org/10.1287/orsc.2023.1657 .

Behind the child penalty: understanding what contributes to the labour market costs of motherhood

We study the short- and long-run effects of having a child on labour market outcomes of mothers compared to non-mothers. Using matched employer-employee data for Italy over 1985–2018, through an event study methodology around childbirth, we show that the long-run child penalty in annual earnings is 52 log points and the penalty largely depends on the reduction in weeks worked by mothers. We then investigate sorting of women with and without children across different types of firms, providing evidence that mothers work in firms with lower productivity, sales, capital and wages after childbirth. Differences in rent-sharing between mothers and non-mothers explain 11.3% of the long-run child penalty in weekly wages, mostly due to between-firm components. Finally, we explore the individual-level, firm-level, and cultural factors that influence the size of child penalties. We find that the child penalty is higher for young, low-wage mothers and those taking longer leaves. It is larger in small firms with less generous pay and worse peers, and in more gender-conservative regions.

The Effects of Partial Employment Protection Reforms: Evidence from Italy

Abstract We combine matched employer–employee data with firms’ financial records to study a 2001 Italian reform that lifted constraints on the employment of temporary contract workers while maintaining rigid employment protection regulations for employees hired under permanent contracts. Exploiting the staggered implementation of the reform across different collective bargaining agreements, we find that this policy change led to an increase in the share of temporary contracts but failed to raise employment. The reform had both winners and losers. Firms are the main winners as the reform was successful in decreasing labor costs, leading to higher profits. By contrast, young workers are the main losers since their earnings were substantially depressed following the policy change. Rent-sharing estimates show that temporary workers receive only two-thirds of the rents shared by firms with permanent workers, helping explain most of the labor costs and earnings reductions caused by the reform.

Demand for older workers: What do we know? What do we need to learn?

The employment rate for workers 55 and over has been increasing across the world for the last two decades. This creates opportunities for employers to diversify their workforce and retain valuable knowledge and skills, while at the same time posing the challenges of rising labor costs and blocked opportunities for younger workers. This study summarizes the economic tradeoffs facing organizations as they design their optimal age structure, along with recent research on how older workers fit into organizations. Empirical studies show that whereas wage and benefit costs increase with age, there is no conclusive evidence that productivity increases as well. Studies using macroeconomic data find no evidence that older workers block opportunities for younger workers, whereas recent papers using a more disaggregated approach find mixed results. A key challenge facing older workers is the decline over the last 20 years in the odds of becoming a new hire. Although the turnover rate for older workers is much lower than for other age groups, employers have concerns about accommodating their work environment and work schedule preferences. Resume studies show age discrimination also plays a factor, especially for women. The paper concludes with suggestions for future research, including interindustry and international comparisons of microeconomic data on employment by age group and re-examining matched employee-employer data sets.

Firms and inequality when unemployment is high

How important are firms for wage inequality in developing countries where structural unemployment is high? Research focused on contexts close to full employment has suggested a substantial role of firms in labor market inequality. Using matched employer–employee data from South Africa, I find that firms explain a larger share of wage variation than in richer countries. I consider drivers of this, documenting first a higher productivity dispersion as found for other developing countries. Secondly, I estimate the separations elasticity by instrumenting wages of matched workers with firm wages, and I find a low separations elasticity. This generates a high degree of monopsony, and the correspondingly high estimated rent-sharing elasticity helps explain the important role of firm wage policies in inequality. Monopsony may be driven by higher unemployment, and regional heterogeneity provides suggestive evidence for this. Such firm-level competitive dynamics may exacerbate inequality in developing countries more generally.

Gender differences in sorting on wages and risk

We use Brazilian matched employer–employee data to provide new evidence on gender disparities in labor market sorting on wages and workplace safety. We show that women and men sort in highly disparate, but systematic, ways on the basis of physical risk, despite sorting almost identically on financial risk. To understand what factors might explain these gender differences in sorting, we begin by ruling out the possibility that men and women receive different compensating wage differentials for risk. We find that women do earn smaller establishment wage premia than men on average, but this difference is also unlikely to explain the sorting patterns. Despite having little direct effect on wages, sorting on safety may have large indirect effects on the wage gap through its outsized influence on the segregation of women and men across establishments. This segregation results in men earning substantially higher establishment wage premia, which explains 28% of the entire gender wage gap in Brazil.