Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
IFAU - Institute for Evaluation of Labour Market and Education Policy Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2011:9:
Wage adjustment and productivity shocks

Mikael Carlsson (), Julián Messina () and Oskar Nordström Skans ()

Abstract: We study how workers' wages respond to TFP-driven innovations in firms' labor productivity. Using unique data with highly reliable firm-level output prices and quantities in the manufacturing sector in Sweden, we are able to derive measures of physical (as opposed to revenue) TFP to instrument labor productivity in the wage equations. We find that the reaction of wages to sectoral labor productivity is almost three times lager than the response to pure idiosyncratic (firm-level) shocks, a result which crucially hinges on the use of physical TFP as an instrument. These results are all robust to a number of empirical specifications, including models accounting for selection on both the demand and supply side through worker-firm (match) fixed effects. Further results suggest that technological progress at the firm level has negligible effects on the firm-level composition of employees.

Keywords: Matched employer-employee data; Sorting; Wage; Labor productivity; TFP; (follow links to similar papers)

JEL-Codes: J23; J31; J33; (follow links to similar papers)

57 pages, May 11, 2011

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

wp11-09-Wage-adjustment-and-productivity-shocks.pdf    PDF-file
Download Statistics
This paper is published as:
Carlsson, Mikael, Julián Messina and Oskar Nordström Skans, (2016), 'Wage adjustment and productivity shocks', The Economic Journal, Vol. 126, september, No. 595, pages 1739-1773

Questions (including download problems) about the papers in this series should be directed to Monica Fällgren ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:ifauwp:2011_009 This page was generated on 2016-10-06 13:38:23