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Is Bigger Still Better? The Decline of the Wage Premium at Large Firms

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  • William E. Even

    ()
    (Raymond E. Glos Professor of Economics, Miami University, Oxford, OH 45056, USA)

  • David A. Macpherson

    ()
    (E.M. Stevens Professor of Economics, Trinity University, San Antonio, TX 78212, USA; corresponding author)

Abstract

This study shows that the wage premium paid by large firms fell over the past 20 years and that this decline in the size premium is most pronounced among the least educated workers. Empirical evidence supports several explanations for the shrinking size premium. First, there has been a convergence in the returns to worker characteristics at large and small firms over time. Second, small and large firms are hiring more workers with similar characteristics. Particularly important are the declining share of workers at large manufacturing firms and the rising share of workers at large retail firms. Also, the greater decline of unionism at large firms has contributed significantly to the decline in the size premium.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 78 (2012)
Issue (Month): 4 (April)
Pages: 1181-1201

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Handle: RePEc:sej:ancoec:v:78:4:y:2012:p:1181-1201

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  1. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
  2. Yu, Li & Hurley, Terrance M. & Kliebenstein, James & Orazem, Peter, 2008. "Firm Size, Technical Change And Wages In The Pork Sector, 1990 -2005," Staff General Research Papers 12921, Iowa State University, Department of Economics.
  3. Christopher R. Bollinger & Barry T. Hirsch, 2006. "Match Bias from Earnings Imputation in the Current Population Survey: The Case of Imperfect Matching," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 483-520, July.
  4. Dale Belman & David I. Levine, 2004. "Size, Skill and Sorting," LABOUR, CEIS, vol. 18(4), pages 515-561, December.
  5. Dunne, Timothy & Schmitz, James A, Jr, 1995. "Wages, Employment Structure and Employer Size-Wage Premia: Their Relationship to Advanced-Technology Usage at US Manufacturing Establishments," Economica, London School of Economics and Political Science, vol. 62(245), pages 89-107, February.
  6. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "Why do large firms pay higher wages? evidence from matched worker-firm data," ULB Institutional Repository 2013/8743, ULB -- Universite Libre de Bruxelles.
  7. Ronald L. Oaxaca & Michael R. Ransom, 1999. "Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 154-157, February.
  8. Kevin T. Reilly, 1995. "Human Capital and Information: The Employer Size-Wage Effect," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 1-18.
  9. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  10. Kostiuk, Peter F, 1990. "Compensating Differentials for Shift Work," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1054-75, October.
  11. Meagher, Kieron J. & Wilson, Hugh, 2004. "Different firm size effects on wages for supervisors and workers," Economics Letters, Elsevier, vol. 84(2), pages 225-230, August.
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Cited by:
  1. Fernando Rios-Avila & Barry T. Hirsch, 2014. "Unions, Wage Gaps, and Wage Dispersion: New Evidence from the Americas," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(1), pages 1-27, 01.
  2. Edison Roy César & François Vaillancourt, 2010. "Does a Specific Union Impact on Wage Increases? Evidence from Canada, 1985-2007," CIRANO Working Papers 2010s-09, CIRANO.

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