National wage setting

Hazell, Joe ORCID: 0009-0002-4930-7946, Patterson, Christina, Sarsons, Heather and Taska, Bledi (2025) National wage setting. American Economic Review. ISSN 0002-8282 (In Press)

Text (National_Wage_Setting) - Accepted Version Pending embargo until 1 January 2100. Available under License Creative Commons Attribution. Download (2MB)

Abstract

How do firms set wages across space? We document four facts using matched employer-employee data. First, firms rather than locations explain most of the variation in wages within a job, with an excess mass of firms paying near-identical wages across space. Second, nominal wages within the firm vary relatively little with local prices, compared to how wages vary between firms. Third, wage growth is more correlated with firm-level rather than regional factors. Fourth, local wage shocks cause wage growth in the rest of the firm, but only for jobs that initially pay similar wages across space. We argue these patterns indicate national wage setting, in which firms compress nominal wages across space relative to what benchmark models predict.

Item Type:	Article
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
JEL classification:	J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods J - Labor and Demographic Economics > J4 - Particular Labor Markets > J45 - Public Sector Labor Markets H - Public Economics > H5 - National Government Expenditures and Related Policies > H56 - National Security and War
Date Deposited:	03 Nov 2025 12:03
Last Modified:	03 Nov 2025 14:00
URI:	http://eprints.lse.ac.uk/id/eprint/130031

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