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This study uses a prototype linked employer-employee database (LEED) to analyse both employee and firm characteristics to identify factors that explain differences in labour productivity across firms and industries. We created the prototype LEED by linking de-identified individual Personal Income Tax and Business Tax data from the Australian Taxation Office (ATO) with the Australian Bureau of Statistics (ABS) Business Longitudinal Database (BLD), for the 2010–11 financial year. We demonstrate the analytical potential of the prototype LEED by constructing multilevel models to describe employer and employee characteristics of productive firms. The hierarchical structure of the prototype LEED lends itself to using multilevel models to capture the dynamics between firms and employees. A LEED is a rich database that provides a great opportunity for further labour and productivity research. We have proposed some key areas to further develop this preliminary research.
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