Internal and External Labor Markets: An Analysis of Matched Longitudinal Employer-Employee Data

John M. Abowd, Francis Kramarz

NBER Working Paper No. 6109
Issued in July 1997
NBER Program(s):Labor Studies

We decompose the real annual full time compensation costs of 1.1 million French workers followed over 12 years into a part that reflects their external opportunity wage and a part that reflects their internal wage rate. Using these components of compensation we investigate the extent to which firm-size wage differentials and inter-industry wage differentials are due to variability in the external wage (person effects) versus variability in the internal wage (firm effects). For France, we find that most of the firm-size wage effect and most of the inter-industry wage effect is due to person effects differences in the external wage rates.

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Document Object Identifier (DOI): 10.3386/w6109

Published: Internal and External Labor Markets: An Analysis of Matched Longitudinal Employer-Employee Data, John M. Abowd, Francis Kramarz. in Labor Statistics Measurement Issues, Haltiwanger, Manser, and Topel. 1998