Multi-establishment firms account for around 60% of U.S. workers' primary employers, providing ample opportunity for workers to change their work location without changing their employer. Using U.S. matched employer-employee data, this paper analyzes workers' access to and use of such between-establishment job transitions, and estimates the effect on workers' earnings growth of greater access, as measured by proximity of employment at other within-firm establishments. While establishment transitions are not perfectly observed, we estimate that within-firm establishment transitions account for 7.8% percent of all job transitions and 18.2% of transitions originating from the largest firms. Using variation in worker's establishment locations within their firms' establishment network, we show that having a greater share of the firm's jobs in nearby establishments generates meaningful increases in workers' earnings: a worker at the 90th percentile of earnings gains from more proximate within-firm job opportunities can expect to enjoy 2% higher average earnings over the following five years than a worker at the 10th percentile with the same baseline earnings.
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Re-assessing the Spatial Mismatch Hypothesis
April 2025
Working Paper Number:
CES-25-23
We use detailed location information from the Longitudinal Employer-Household Dynamics (LEHD) database to develop new evidence on the effects of spatial mismatch on the relative earnings of Black workers in large US cities. We classify workplaces by the size of the pay premiums they offer in a two-way fixed effects model, providing a simple metric for defining 'good' jobs. We show that: (a) Black workers earn nearly the same average wage premiums as whites; (b) in most cities Black workers live closer to jobs, and closer to good jobs, than do whites; (c) Black workers typically commute shorter distances than whites; and (d) people who commute further earn higher average pay premiums, but the elasticity with respect to distance traveled is slightly lower for Black workers. We conclude that geographic proximity to good jobs is unlikely to be a major source of the racial earnings gaps in major U.S. cities today.
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Exploring the Hiring, Pay, and Trading Patterns of U.S. Firms: The Dominance of Multinationals Engaged in Related-Party Trade
December 2024
Working Paper Number:
CES-24-77
We link U.S. job records with both firm-level business register and customs records to construct a novel set of summary statistics and descriptive regressions that highlight the central role played by the small set of multinational firms (denoted RP XM firms) who engage in both importing and exporting with related parties in translating international trade shocks to shifts in labor demand. We find that RP XM firms 1) dominate trade volumes; 2) account for very disproportionate shares of national employment and payroll; 3) employ greater shares of workers in higher pay deciles; 4) disproportionately poach other firms' high paid workers; 5) offer higher raises to their existing workers. These hiring and pay patterns generally exist even among new RP XM firms, but strengthen with RP XM tenure, and continue to hold, albeit at smaller magnitudes, after conditioning on standard proxies for firm and worker productivity. Taken together, these findings reveal that RP XM status is a reliable proxy for the kind of firm that drives the initial labor market impacts of trade shocks, and that high paid workers are likely to be most directly exposed to such shocks.
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Contrasting the Local and National Demographic Incidence of Local Labor Demand Shocks
July 2024
Working Paper Number:
CES-24-36
This paper examines how spatial frictions that differ among heterogeneous workers and establishments shape the geographic and demographic incidence of alternative local labor demand shocks, with implications for the appropriate level of government at which to fund local economic initiatives. LEHD data featuring millions of job transitions facilitate estimation of a rich two-sided labor market assignment model. The model generates simulated forecasts of many alternative local demand shocks featuring different establishment compositions and local areas. Workers within 10 miles receive only 11.2% (6.6%) of nationwide welfare (employment) short-run gains, with at least 35.9% (62.0%) accruing to out-of-state workers, despite much larger per-worker impacts for the closest workers. Local incidence by demographic category is very sensitive to shock composition, but different shocks produce similar demographic incidence farther from the shock. Furthermore, the remaining heterogeneity in incidence at the state or national level can reverse patterns of heterogeneous demographic impacts at the local level. Overall, the results suggest that reduced-form approaches using distant locations as controls can produce accurate estimates of local shock impacts on local workers, but that the distribution of local impacts badly approximates shocks' statewide or national incidence.
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Do Labor Market Networks Have An Important Spatial Dimension?
September 2012
Working Paper Number:
CES-12-30
We test for evidence of spatial, residence-based labor market networks. Turnover is lower for workers more connected to their neighbors generally and more connected to neighbors of the same race or ethnic group. Both results are consistent with networks producing better job matches, while the latter could also reflect preferences for working with neighbors of the same race or ethnicity. For earnings, we find a robust positive effect of the overall residence-based network measure, whereas we usually find a negative effect of the same-group measure, suggesting that the overall network measure reflects productivity enhancing positive network effects, while the same-group measure captures a non-wage amenity.
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Earnings Inequality and Coordination Costs: Evidence from U.S. Law Firms
September 2009
Working Paper Number:
CES-09-24
Earnings inequality has increased substantially since the 1970s. Using evidence from confidential Census data on U.S. law offices on lawyers' organization and earnings, we study the extent to which the mechanism suggested by Lucas (1978) and Rosen (1982), a scale of operations effect linking spans of control and earnings inequality, is responsible for increases in inequality. We first show that earnings inequality among lawyers increased substantially between 1977 and 1992, and that the distribution of partner-associate ratios across offices changed in ways consistent with the hypothesis that coordination costs fell during this period. We then propose a 'hierarchical production function' in which output is the product of skill and time and estimate its parameters, applying insights from the equilibrium assignment literature. We find that coordination costs fell broadly and steadily during this period, so that hiring one's first associate leveraged a partner's skill by about 30% more in 1992 than 1977. We find also that changes in lawyers' hierarchical organization account for about 2/3 of the increase in earnings inequality among lawyers in the upper tail, but a much smaller share of the increase in inequality between lawyers in the upper tail and other lawyers. These findings indicate that new organizational efficiencies potentially explain increases in inequality, especially among individuals toward the top of the earnings distribution.
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Access to Financing and Racial Pay Gap Inside Firms
July 2023
Working Paper Number:
CES-23-36
How does access to financing influence racial pay inequality inside firms? We answer this question using the employer-employee matched data administered by the U.S. Census Bureau and detailed resume data recording workers' career trajectories. Exploiting exogenous shocks to firms' debt capacity, we find that better access to debt financing significantly narrows the earnings gap between minority and white workers. Minority workers experience a persistent increase in earnings and also a rise in the pay rank relative to white workers in the same firm. The effect is more pronounced among mid- and high-skill minority workers, in areas where white workers are in shorter supply, and for firms with ex-ante less diverse boards and greater pre-existing racial inequality. With better access to financing, minority workers are also more likely to be promoted or be reassigned to technology-oriented occupations compared to white workers. Our evidence is consistent with access to financing making firms better utilize minority workers' human capital.
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Revisions to the LEHD Establishment Imputation Procedure and Applications to Administrative Job Frame
September 2024
Working Paper Number:
CES-24-51
The Census Bureau is developing a 'job frame' to provide detailed job-level employment data across the U.S. through linked administrative records such as unemployment insurance and IRS W-2 filings. This working paper summarizes the research conducted by the job frame development team on modifying and extending the LEHD Unit-to-Worker (U2W) imputation procedure for the job frame prototype. It provides a conceptual overview of the U2W imputation method, highlighting key challenges and tradeoffs in its current application. The paper then presents four imputation methodologies and evaluates their performance in areas such as establishment assignment accuracy, establishment size matching, and job separation rates. The results show that all methodologies perform similarly in assigning workers to the correct establishment. Non-spell-based methodologies excel in matching establishment sizes, while spell-based methodologies perform better in accurately tracking separation rates.
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THE BRIGHT SIDE OF CORPORATE DIVERSIFICATION: EVIDENCE FROM INTERNAL LABOR MARKETS
August 2013
Working Paper Number:
CES-13-40
We estimate the labor market consequences of corporate diversification using worker-firm matched data from the U.S. Census Bureau. We find evidence that workers in diversified firms have greater cross-industry mobility. Displaced workers experience significantly smaller losses when they move to a firm in a new industry in which their former firm alsooperates. We also find more active internal labor markets in diversified firms. Diversified firms exploit the option to redeploy workers internally from declining to expanding industries. Though diversified firms pay higher wages to retain workers, their labor is also more productive than focused firms of the same size, age, and industry. Overall, internal labor markets provide a bright side to corporate diversification.
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Size Matters: Matching Externalities and the Advantages of Large Labor Markets
April 2025
Working Paper Number:
CES-25-22
Economists have long hypothesized that large and thick labor markets facilitate the matching between workers and firms. We use administrative data from the LEHD to compare the job search outcomes of workers originally in large and small markets who lost their jobs due to a firm closure. We define a labor market as the Commuting Zone'industry pair in the quarter before the closure. To account for the possible sorting of high-quality workers into larger markets, the effect of market size is identified by comparing workers in large and small markets within the same CZ, conditional on workers fixed effects. In the six quarters before their firm's closure, workers in small and large markets have a similar probability of employment and quarterly earnings. Following the closure, workers in larger markets experience significantly shorter non-employment spells and smaller earning losses than workers in smaller markets, indicating that larger markets partially insure workers against idiosyncratic employment shocks. A 1 percent increase in market size results in a 0.015 and 0.023 percentage points increase in the 1-year re-employment probability of high school and college graduates, respectively. Displaced workers in larger markets also experience a significantly lower need for relocation to a different CZ. Conditional on finding a new job, the quality of the new worker-firm match is higher in larger markets, as proxied by a higher probability that the new match lasts more than one year; the new industry is the same as the old one; and the new industry is a 'good fit' for the worker's college major. Consistent with the notion that market size should be particularly consequential for more specialized workers, we find that the effects are larger in industries where human capital is more specialized and less portable. Our findings may help explain the geographical agglomeration of industries'especially those that make intensive use of highly specialized workers'and validate one of the mechanisms that urban economists have proposed for the existence of agglomeration economies.
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THE URBAN DENSITY PREMIUM ACROSS ESTABLISHMENTS
October 2014
Working Paper Number:
CES-14-43
We use longitudinal microdata to estimate the urban density premium for U.S. establishments, controlling for observed establishment characteristics and dynamic establishment behavior. Consistent with previous studies, we estimate a density premium between 6 and 10 percent, even after controlling for establishment composition, local skill mix, and the endogeneity of location choice. More importantly, we find that the estimated density premium is realized almost entirely at birth and is constant over the life of establishments. We find little evidence that the endogenous entry or exit of establishments can account for any of the estimated density premium. We interpret our results as implying that the returns to agglomeration diffuse within a city through a reallocation channel rather than through an increase in the productivity of existing firms.
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