| Abstract |
In this paper we develop and estimate a general dynamic framework for identifying wage markdowns, firm/worker productivity and adjustment costs. We show novel facts: markdowns are widening in worker ability, firm size, and firm productivity. Constrained firms pay workers above their MRPL and have lower passthrough elasticities, lower (negative) profits and are more leveraged. Large firms are more constrained than small firms. We find that labor supply elasticities partially pin down the level of markdowns, but the variance in markdowns is driven by firm-level employment and adjustment costs. |