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Managers, Coordination, and the Firm Age-Wage Relationship

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  • Peter Thompson

    ()
    (Department of Economics, Florida International University)

Abstract

This 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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File URL: http://casgroup.fiu.edu/pages/docs/1569/1280267716_09-08.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0908.

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Length: 21 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:fiu:wpaper:0908

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Keywords: Management; firm age and wages; self-employment;

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