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Wage Dynamics along the Life-Cycle of Manufacturing Plants

Author

Listed:
  • Emin Dinlersoz
  • Henry Hyatt
  • Sang Nguyen

Abstract

This paper explores the evolution of average wage paid to employees along the life-cycle of a manufacturing plant in U.S. Average wage starts out low for a new plant and increases along with labor productivity, as the plant survives and ages. As a plant experiences productivity decline and approaches exit, average wage falls, but more slowly than it rises in the case of surviving new plants. Moreover, average wage declines slower than productivity does in failing plants, while it rises relatively faster as productivity increases in surviving new plants. These empirical regularities are studied in a dynamic model of labor quality and quantity choice by plants, where labor quality is reflected in wages. The model’s parameters are estimated to assess the costs a plant incurs as it alters its labor quality and quantity in response to changes in its productivity over its life-cycle.

Suggested Citation

  • Emin Dinlersoz & Henry Hyatt & Sang Nguyen, 2011. "Wage Dynamics along the Life-Cycle of Manufacturing Plants," Working Papers 11-24, Center for Economic Studies, U.S. Census Bureau, revised Mar 2013.
    • Handle: RePEc:cen:wpaper:11-24
    as

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    File URL: https://www2.census.gov/ces/wp/2011/CES-WP-11-24R.pdf
    File Function: Revised version, 2013
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    File URL: https://www2.census.gov/ces/wp/2011/CES-WP-11-24.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Wage dynamics; plant productivity; firm dynamics; plant life-cycle; employment dynamics; manufacturing.;
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