Do Volatile Firms Pay Volatile Earnings? Evidence from Linked Worker-Firm Data

26 Pages Posted: 25 May 2017

See all articles by Michael R. Strain

Michael R. Strain

American Enterprise Institute; IZA

Date Written: January 13, 2017

Abstract

Despite the importance of earnings instability, little is known about its correlates or causes. This article seeks to better understand earnings instability by studying whether volatile firms pay volatile earnings and is the first to directly test the relationship using US linked employer–employee data. The article finds a positive and statistically significant relationship using within-firm variation. In addition, this article finds that lower earning workers are passed significantly more volatility from their employing firms than are higher earning workers.

Keywords: Earnings Instability, Compensation, Firm Instability, Linked Data, Transitory Earnings Volatility

JEL Classification: J3, J5

Suggested Citation

Strain, Michael, Do Volatile Firms Pay Volatile Earnings? Evidence from Linked Worker-Firm Data (January 13, 2017). Applied Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2972693

Michael Strain (Contact Author)

American Enterprise Institute ( email )

1789 Massachusetts Ave NW
Washington, DC 20036
United States

HOME PAGE: http://sites.google.com/site/mrstrain/

IZA ( email )

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