NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Firm Performance and the Volatility of Worker Earnings

Chinhui Juhn, Kristin McCue, Holly Monti, Brooks Pierce

NBER Working Paper No. 23102
Issued in January 2017
NBER Program(s):Economic Fluctuations and Growth, Labor Studies, Productivity, Innovation, and Entrepreneurship

Using linked employer-employee data for the U.S., we examine whether shocks to firm revenues are transmitted to the earnings of continuing employees. While full insurance is rejected, the elasticity of worker earnings with respect to persistent shocks in firm revenues is small and consistent with the notion that firms insulate workers from idiosyncratic shocks. Exploring heterogeneity of effects, we find the largest elasticity in professional services, among employees in the top 5% of their employers’ earnings distribution, suggesting that in certain jobs performance pay may be a countervailing force to wage insurance.

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Document Object Identifier (DOI): 10.3386/w23102

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