National wage setting

How do firms set wages across space? We document four facts using matched employer-employee data. First, firms rather than locations explain most of the variation in wages within a job, with an excess mass of firms paying near-identical wages across space. Second, nominal wages within the firm vary relatively little with local prices, compared to how wages vary between firms. Third, wage growth is more correlated with firm-level rather than regional factors. Fourth, local wage shocks cause wage growth in the rest of the firm, but only for jobs that initially pay similar wages across space. We argue these patterns indicate national wage setting, in which firms compress nominal wages across space relative to what benchmark models predict.