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Labour Supply and Firm Size

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  • Lin Shao
  • Faisal Sohail
  • Emircan Yurdagul

Abstract

Larger firms feature i) longer hours worked, ii) higher wages, and iii) smaller (larger) wage penalties for working long (short) hours. We reconcile these patterns in a general equilibrium model, which features the endogenous interaction of hours, wages, and firm size. In the model, workers willing to work longer hours sort into larger firms that offer a wage premium. Complementarities in hours worked generate wage penalties that increase with the distance from the average firm hours. We use the model to argue about the importance of the interaction between hours, wages, and firm size on inequality.

Suggested Citation

  • Lin Shao & Faisal Sohail & Emircan Yurdagul, 2023. "Labour Supply and Firm Size," Staff Working Papers 23-47, Bank of Canada.
    • Handle: RePEc:bca:bocawp:23-47
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    References listed on IDEAS

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    More about this item

    Keywords

    Firm dynamics; Labour markets;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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