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The development of a database infrastructure that captures the complex interactions among households and businesses at the micro level and characterizes the dynamics of the modern economy is critical for the social sciences. The creation of such an infrastructure has posed a major challenge to national statistical institutes. Since most institutes collect, store and disseminate data on the engines of economic growth-businesses and households-in twin data silos, proposals to integrate the two face technical, monetary, legal, and policy obstacles that go far beyond the norm of data collection activities. Recent efforts at the Longitudinal Employer-Household Dynamics (LEHD) Program at the U.S. Census Bureau have finally made this critical data infrastructure achievable and accessible.
The potential uses of longitudinal integrated employer-employee data are far-reaching. A partial list includes: the effect of technological and structural change on earnings, employment and productivity; the analysis of the firm-specific contribution to pay; the effect of firm wage setting and turnover policies on productivity; the impact of firm policies on different groups of workers (e.g., welfare recipients); the effect of firm expansion, exit and relocation decisions on neighborhood demographic composition, the analysis of worker commuting patterns and mobility; and a full accounting of the returns to firms and workers of investments in enterprise training, research and development. These data are also essential for unraveling some of the striking findings in the industrial organization and productivity literatures regarding the nature of business dynamics and the sources of micro and aggregate productivity growth.
Fields other than industrial organization and labor economics will be similarly enriched. For example, environmentalists can examine the impact of different firms' pollution levels on worker and firm outcomes. Health specialists can examine, with large samples and without expensive clinical studies, the effects of earnings, employment history, firm personnel practices, and health benefit availability on death rates. Demographers can examine whether workers from different countries sort into firms that have hired their countrymen, what kinds of firms employ immigrants, the dynamics of immigrant mobility across firms, and a host of other issues. Finally, the burgeoning availability of integrated employer-employee data from advanced economies (many European countries as well as New Zealand) as well as developing and transition economies (e.g., Colombia and Slovenia) will permit, for the first time, detailed international comparisons of the dynamic interrelationships among firms and workers-thus extending the research possibilities to international as well as national scientists.
In this paper we describe the new database infrastructure and the current status of research. We also summarize the proposed access protocols. We close with a description of our future agenda.
Note: This report is available in its entirety in the Portable Document Format (PDF).
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
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