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Imperfect Information, On-the-Job Training, and the Employer Size-Wage Puzzle: Theory and Evidence

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  • Feng, Shuaizhang

    ()
    (Shanghai University of Finance and Economics)

  • Zheng, Bingyong

    ()
    (Shanghai University of Finance and Economics)

Abstract

This paper develops a two-period labor market model with imperfect information and on-the-job training, and uses data from National Longitudinal Survey of Youth 1979 Cohorts (NLSY79) to test its predictions. We find that training does not explain the positive relationship between employer size and wage. In addition, for industries that display size-wage premium, workers in large establishments are more likely to receive on-the-job training but their return to training is smaller. Our theory, substantiated by the new empirical evidence, suggests that it is not large firms, per se, but firms that hire better workers who are paying a wage premium.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4998.

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Length: 50 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4998

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Keywords: imperfect information; sorting; on-the-job training; size-wage premium;

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Cited by:
  1. Floreani, Vincent Arthur, 2014. "Fixing Europe's youth unemployment and skills mismatch, can public financial support to SMEs be effective? The case of the European Commission and European Investment Bank joint initiatives," MPRA Paper 55849, University Library of Munich, Germany.
  2. Cai, Hongbin & Wang, Miaojun & Yan, Se, 2014. "Why Do Large Firms Willingly Pay High Wages in Developing Countries?," MPRA Paper 53538, University Library of Munich, Germany.

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