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

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  • William E. Even
  • David A. Macpherson

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.

Suggested Citation

  • William E. Even & David A. Macpherson, 2012. "Is Bigger Still Better? The Decline of the Wage Premium at Large Firms," Southern Economic Journal, John Wiley & Sons, vol. 78(4), pages 1181-1201, April.
    • Handle: RePEc:wly:soecon:v:78:y:2012:i:4:p:1181-1201
    DOI: 10.4284/0038-4038-78.4.1181
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    Cited by:

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    2. 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, January.
    3. Callaci, Brian & Gibson, Matthew & Pinto, Sergio & Steinbaum, Marshall & Walsh, Matt, 2023. "The Effect of Franchise No-Poaching Restrictions on Worker Earnings," IZA Discussion Papers 16330, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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