In the Land of AKM: Explaining the Dynamics of Wage Inequality in France, with Damien Babet and Olivier Godechot
R&R at Journal of Labor Economics
Abstract: We use a newly built and quasi-exhaustive matched employer-employee database to study firms' contribution to wage inequalities in France. Our analysis covering the period from 2002 to 2019 reveals a significant increase in between-firm inequalities, driven by a growing tendency of high-wage workers to cluster together in high-premium firms. These phenomena are directly associated with changes in firms' demographics and workforce composition. Over the same period, bottom earnings percentiles increased more than the rest of the distribution, in line with the rise in the legal minimum wage. As a result, within-firm inequalities decreased, almost offsetting the rising between-firm inequalities.
Abstract: We study the evolution of the gender wage gap in France, focusing on the role of firms and decomposing the gender gap in firm pay premiums into a between-firm and a within-firm component. We leverage new comprehensive employer-employee data and three distinct methodologies to capture time-series dynamics. Our findings reveal that 20\% of the decline in the gender gap in hourly wage between 2002 and 2019 come from a convergence in the sorting of men and women across firms. This is driven by women increasingly sorting into industries hosting higher-wage firms, rather than gaining access to better firms within industries.
Temporary Employment, Firm Heterogeneity and Regulation, with Matteo Sartori
Draft available upon request
Abstract: We study how firm heterogeneity influences the choice between permanent and temporary employment contracts, and show how regulatory interventions affect this relationship. First, we use detailed matched employer-employee records from Italy to document how firms' hiring strategies vary with their productivity. Firms with higher productivity open temporary positions less frequently, but the fixed-term contracts they offer feature substantially longer durations; this results in a lack of correlation between productivity and the share of temporary jobs at the firm level. We then exploit a 2018 reform that tightened temporary jobs legislation in Italy to show how firms' response to regulatory interventions depends on their characteristics: while high-productivity enterprises react by substituting between contract types, switching from temporary jobs to permanent ones, less productive units end up reducing their labor demand. We turn to a search and matching model of the labor market with endogenous contract choice to rationalize these facts. In the model, a firm's share of temporary jobs is determined by its productivity and by the expected duration of the productive time span of each match. The estimated model provides a good fit for the pre-reform economy in terms of temporary employment utilization.
In recent years, several European countries have modified policies concerning temporary employment contracts, oscillating between liberalizations and restraints in a bid to balance employment flexibility and job stability. We study the effects of a 2018 reform that tightened fixed-term contracts legislation on wage dynamics. Our analysis, grounded in extensive administrative data tracking within-firm, within-individual transitions from fixed-term to permanent contracts in Italy, unveils a significant decline in the wage premium accompanying contract conversions post-reform.
Conversions from fixed-term to permanent contracts are an important channel through which firms create permanent jobs. We use data on the universe of employment relationships in Italy between 2012 and 2017 to analyze the factors that predict conversions. We find that within-industry, between-firm factors explain most of the variability. The heterogeneity in firm-level conversion rate maps to marked between-firms differences in fixed-term contracts' average duration and seasonal usage patterns, which allow us to effectively distinguish and measure the different strategies behind the use of temporary jobs: accommodating seasonal swings in activity; screening candidates for permanent positions; increasing workforce flexibility. These results have important policy implications for the design and regulation of fixed-term employment contracts.