Managers, Coordination, and the Firm Age-Wage Relationship
AbstractThis paper describes a version of Lucas’ span of control model, in which managers of younger and smaller firms are less able than managers of older firms to provide precise instructions to employees. Employees differ in their propensity to follow instructions, and those least likely to follow instructions are said to be high-a types. In equilibrium, younger [older] firms employ high-a [low-a] types, and wages exhibit a U-shaped relationship in which the lowest wages are paid by firms of intermediate age. A natural extension of the model, in which employee ability also varies, is developed to examine the effect of employer age and size on entry into self-employment.
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Bibliographic InfoPaper provided by Florida International University, Department of Economics in its series Working Papers with number 0908.
Length: 21 pages
Date of creation: Mar 2009
Date of revision:
Management; firm age and wages; self-employment;
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
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-05-23 (Economics of Ageing)
- NEP-ALL-2009-05-23 (All new papers)
- NEP-BEC-2009-05-23 (Business Economics)
- NEP-ENT-2009-05-23 (Entrepreneurship)
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