Firming Up Inequality
Using US Social Security earnings records linked to employers, the authors decompose the rise in earnings inequality over 1978-2013 into within-firm and between-firm components. They find that most of the increase in earnings dispersion occurred between firms rather than within them, reflecting growing differences in average pay across employers and increased sorting of high-paid workers into high-paying firms. Within the largest firms, however, pay dispersion among workers remained relatively stable.