Human Capital Risk and the Firmsize Wage Premium
AbstractWhy do employed persons in large firms earn more than employed persons in small firms, even after controlling for observable characteristics? Complementary to previous results, this paper proposes a mechanism that gives an answer to this question. In the model, individuals accumulate human capital and are exposed to the risk of losing some of their human capital as they change jobs, voluntarily or involuntarily. The model, calibrated to the United States and Canada, accounts for one-third of the firmsize wage premium. Regarding the earnings gap between Canada and the United States, the model finds that it is solely due to differences in labor market uncertainty.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 08-33.
Length: 53 pages
Date of creation: 2008
Date of revision:
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Economic models; Labour markets; Productivity;
Find related papers by JEL classification:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-07 (All new papers)
- NEP-BEC-2008-10-07 (Business Economics)
- NEP-ENT-2008-10-07 (Entrepreneurship)
- NEP-HRM-2008-10-07 (Human Capital & Human Resource Management)
- NEP-LAB-2008-10-07 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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