Diffusion of Wage Increases
Across Distinct Labor Markets:
Social Comparison and Competitive
Interactions
Daniel Olson
Local Labor Market Competition
Salt Lake City
Minneapolis
Minneapolis
Salt Lake City
Memphis
Memphis
2
Research Question
Does labor market competition interact with
internal multi-office firm processes to cause
diffusion of wage increases across distinct labor
markets?
3
Diffusion of Wage Increases
Salt Lake City
Minneapolis
Social
Comparison
Competition
Competition
Memphis
4
Empirical Setting
Ideal
• No mobility across labor
markets
• Local markets
• No firm-specific human
capital
• Full wage information
Feasible:
Market for New Lawyers
• State-bar requirements
• State specific laws
• Relationship-based
business
• Similar training
• Little prior experience
• Vault, AmLaw,
abovethelaw.com, etc.
5
Data
• US Census confidential micro-data
–
–
–
–
Quarterly wages for individuals
Mid-1990s to 2008
30 US States and all industries
Office locations, wages, and employment for all states
• Martindale-Hubbell directory
– Practice areas
– Law school information
6
Research Design
Salt Lake City
Minneapolis
Treatment
Treated
Control
Control
Memphis
7
Results
t+1
t+2
Social
Competition
Comparison
t <= 0
0
t-3
t-2
t-1
t+1
t+2
t+3
8
Future Work
• Is it social comparison?
– Within firm similarities between offices and
markets
• Essay 2: Competitive responses of single-office
versus multi-office firms
• Essay 3: Individual-level impact on mobility
and entrepreneurship
9
Contributions and Implications
• Diffusion without threat of cross-market mobility
• Wage pressures from unanticipated sources
• Firm scope and life-cycle consequences
In salary wars, the competitors of your
competitors are not your friends
10
Research Portfolio
Wage diffusion
across disconnected
labor markets
Employee
Mobility
Social
Comparison
Wage changes and
the mobility and
entrepreneurship of
lawyers
Employee
Entrepreneurship
Multi-office firms
versus single-office
firms
11
Research Portfolio
How CSR reduces employee
turnover (R&R at AMJ)
with S. Carnahan &
D. Kryscynski
Employee
Mobility
Join or create competition?
Market frictions, mobility,
and entrepreneurship
(data analysis) with
R. Agarwal & B. Campbell
Social influence and
competition between
critics (working paper)
with D. Waguespack
Social
Comparison
Employee
Entrepreneurship
Firm size effect or
performance effect?
(data analysis)
with R. Agarwal
Employee mobility and
entrepreneurship: A virtual
special issue (SMJ VSI Intro)
with R. Agarwal &
A. Gambardella
z12