%0 Report
        %A Bingley, Paul
%A Cappellari, Lorenzo
        %T Workers, Firms and Life-Cycle Wage Dynamics
        %D 2018
        %8 2018 Mar
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 11402
        %U https://www.iza.org/index.php/publications/dp11402
        %X Studies of individual wage dynamics typically ignore firm heterogeneity, whereas decompositions of earnings into worker and firm effects abstract from life-cycle considerations. We study firm effects in individual wage dynamics using administrative data on the population of Italian employers and employees. We propose a novel identification strategy for firm-related wage components exploiting the informative content of the wage covariance structure of coworkers. Wage inequality increases three-fold over the working life; firm effects are predominant while young, but sorting of workers into firms becomes increasingly important, explaining the largest share of lifetime inequality. Static models that do not allow for life-cycle dynamics underestimate the importance of sorting and overstate match and firm effects.
        %K wage inequality
%K wage dynamics
%K co-workers' covariance