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Do newly founded firms pay lower wages? : first evidence from Germany

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Author Info

  • Brixy, Udo

    () (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

  • Kohaut, Susanne

    () (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

  • Schnabel, Claus

Abstract

"Using a linked employer-employee data set for Germany, this paper analyses wage setting in a cohort of newly founded and other establishments from 1997 to 2001. While theory provides alternative explanations for higher or lower wages in newly founded firms, we show empirically that start-ups tend to pay lower wages, ceteris paribus. On average, wages in newly founded establishments are 8 percent lower than in similar incumbent firms. This negative wage differential is substantially smaller in eastern than in western Germany. The wage differential is shown to decline over time as the newly founded firms become more mature." (Author's abstract, IAB-Doku) ((en))

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Bibliographic Info

Paper provided by Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] in its series IAB Discussion Paper with number 200404.

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Length: 22 pages
Date of creation: 28 Sep 2004
Date of revision:
Publication status: published in: Small Business Economics, Vol. 29, No. 1/2 (2007), p. 161-171
Handle: RePEc:iab:iabdpa:200404

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Related research

Keywords: IAB-Linked-Employer-Employee-Datensatz; Unternehmensgründung; Unternehmensalter; Lohnstruktur; Lohnhöhe;

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References

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  1. Wagner, Joachim, 1994. "The Post-entry Performance of New Small Firms in German Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 141-54, June.
  2. Gernandt, Johannes & Pfeiffer, Friedhelm, 2005. "Einstiegslöhne bei unvollkommenen Arbeitsmärkten," ZEW Discussion Papers 05-26, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  4. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
  5. Kölling, Arnd & Schnabel, Claus & Wagner, Joachim, 2002. "Establishment Age and Wages: Evidence from German Linked Employer-Employee Data," IZA Discussion Papers 679, Institute for the Study of Labor (IZA).
  6. Brixy, Udo & Kohaut, Susanne, 1999. " Employment Growth Determinants in New Firms in Eastern Germany," Small Business Economics, Springer, vol. 13(2), pages 155-70, September.
  7. Claudio Michelacci & Vincenzo Quadrini, 2005. "Financial Markets and Wages," NBER Working Papers 11050, National Bureau of Economic Research, Inc.
  8. Heyman, Fredrik, 2004. "The Employer Age-Wage Effect: Evidence from Matched Employer-Employee Data," Working Paper Series 193, Trade Union Institute for Economic Research.
  9. Doms, Mark & Dunne, Timothy & Troske, Kenneth R, 1997. "Workers, Wages, and Technology," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 253-90, February.
  10. Charles Brown & James L. Medoff, 2001. "Firm Age and Wages," NBER Working Papers 8552, National Bureau of Economic Research, Inc.
  11. Audretsch, David B. & van Leeuwen, George & Menkveld, Bert & Thurik, Roy, 2001. "Market dynamics in the Netherlands: Competition policy and the role of small firms," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 795-821, April.
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