Yannick Bormans and Angelos Theodorakopoulos

This paper examines links between evolutions in productivity dispersion, wage dispersion, and superstar firms. Using a rich sample of firms in 14 EU countries from 2000-2016, we confirm increases in all three variables—albeit with a moderating effect for wage and productivity dispersion in recent years. Beyond documenting an incomplete pass-through from productivity into wages, we present novel evidence of an even weaker pass-through in industries dominated by superstar firms. This effect is observed both in the lower and upper parts of the productivity and wage distributions, pointing to different mechanisms at play which are consistent with theoretical work and a series of underlying structural changes in the economy.