published in: Journal of Labor Economics, 2004, 22 (2), 397-430
By exploiting establishment-level data, this paper sheds new light on the sources of the
changes in the structure of production, wages, and employment that have occurred over the
last several decades. We investigate the following two related hypotheses. First, that most of
the recent increase in the dispersion of wages and productivity has occurred across
establishments and these changes are linked. Second, that the increased dispersion in
wages and productivity across establishments is linked to differential rates of technological
adoption across establishments. Our findings are largely supportive of these hypotheses.
Specifically, we find that (1) the between-plant component of wage dispersion is an important
and growing part of total wage dispersion; (2) much of the between plant increase in wage
dispersion is within industries; (3) the between-plant measures of wage and productivity
dispersion have increased substantially over the last few decades; and (4) a significant
fraction of the rising dispersion in wages and (to a lesser extent) productivity is accounted for
by changes in the distribution of computer investment across plants as well as changes in the
wage and productivity differentials associated with the computer investment.
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