Productivity dispersion, wage dispersion and superstar firms

Abstract

Using a rich sample of firms in 14 EU countries from 2000 to 2016, we confirm increases in productivity dispersion, wage dispersion and superstar firms. Beyond reaffirming an incomplete pass‐through from productivity to wages, we present novel empirical evidence of an even weaker pass‐through in industries dominated by superstar firms. This effect is observed in both the lower and upper parts of the productivity and wage distributions, and is stronger for tradable (versus non‐tradable) sectors and markets with low (versus high) collective bargaining power. These findings point to different mechanisms, consistent with theoretical work and various underlying structural changes in the economy.