Firms and Wages: Evidence from Displaced Workers
Thomas F. Crossley (York University)
January 1998
Abstract
I use a unique data set of Canadian displaced workers to measure the effects of firm of employment on wages. This data set has the advantage of consisting of a sample of workers changing jobs for reasons (product demand shifts or technological changes) that are largely orthogonal to their individual levels of “ability”. It is also drawn from a labor market with wage-setting institutions that are quite similar to the U.S. My main findings are that, even within narrowly-defined industries, there are economically large and statistically significant firm wage effects that cannot be accounted for by unobserved worker heterogeneity. For a number of reasons, including the evidence I present on tenure, these effects are not easily attributable to compensating differentials, thus suggesting a role for models in which job rents play a role.
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