The Relative Importance of Employer and Employee Effects on Compensation: A Comparison of France and the United States

John M. Abowd, Francis Kramarz, David N. Margolis, Kenneth R. Troske

Research output: Contribution to journalArticlepeer-review

24 Scopus citations


Using individual data on compensation, matched with establishment and firm data on performance and inputs, we compare the French and American pay systems. The compensation measures are decomposed into components related to measured individual characteristics, establishment-enterprise effects, and a residual. In France, the compensation outcomes are more compressed than in the United States. For France, individual characteristics and establishment effects explain more of the variability in compensation outcomes than in the United States. The observable and unobservable components of compensation are identically correlated in the two countries. The relations among compensation components (individual and establishment) and firm performance outcomes (value-added per worker, sales per worker, and profit per unit of capital) exhibit some important similarities and differences between the countries. Higher paid workers, either because of individual characteristics or establishment effects, are employed in firms that are more productive. Higher pay due to enterprise heterogeneity is associated with higher profitability in France but lower profitability in the United States. J. Japan Int. Econ. December 2001, 15(4), pp. 419-436. Department of Labor Economics, Cornell University, 259 Ives Hall, Ithaca, New York 14853-3901, CREST and NBER; CREST-INSEE, 15, bd Gabriel Péri, 92245 Malakoff Cedex, France, CEPR and IZA; LAMIA-TEAM, Université de Paris 1 Panthéon-Sorbonne, 106-112, bd de l'Hôpital, 75647 Paris Cedex 13, France, and Crest; and Department of Economics, University of Missouri-Columbia, 118 Professional Bldg., Columbia, Missouri 65211.

Original languageEnglish
Pages (from-to)419-436
Number of pages18
JournalJournal of the Japanese and International Economies
Issue number4
StatePublished - Dec 2001

Bibliographical note

Funding Information:
1The authors gratefully acknowledge the financia support of the National Science Foundation (SBER 96-18111 and SBR 93-21053) and the Centre de Recherche en Economie et Statistique (CREST), Paris. The data used in this paper are confidentia but the authors’ access is not exclusive. For further information concerning the French data, contact INSEE/CREST, 15, bd Gabriel Péri, 92244 Malakoff Cedex, France. For further information concerning the American data, contact the Center for Economic Studies, U.S. Bureau of the Census, Washington, DC.

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations


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