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Establishment Age and Wages: Evidence from German Linked Employer-Employee Data

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Author Info

  • Kölling, Arnd

    ()
    (Institute for Employment Research (IAB), Nuremberg)

  • Schnabel, Claus

    ()
    (University of Erlangen-Nuremberg)

  • Wagner, Joachim

    ()
    (Leuphana University Lüneburg)

Abstract

Research in wage differentials has a long tradition. Prominent reasons why people make more or less money in the labor market include personal characteristics of the employee (e.g., human capital or gender), job characteristics (working conditions demanding compensating wage differentials), and characteristics of the employer (e.g., industry or firm size). An emerging empirical literature suggests that one hitherto overlooked firm characteristic matters, too: Employers which are in business for a longer period of time tend to pay higher wages. Using a unique rich set of linked employer-employee data we present first empirical evidence on this firm age - wage nexus for Germany. We find that older firms pay on average higher wages for workers with the same broadly defined degree of formal qualification. This firm age differential vanishes after controlling for further worker characteristics and other firm characteristics besides age; if anything, younger firms pay more ceteris paribus. These results are in line with findings from a recent study by Brown and Medoff using U.S. data.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 679.

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Length: 29 pages
Date of creation: Dec 2002
Date of revision:
Publication status: published in: Beiträge zur Arbeitsmarkt- und Berufsforschung, 2005, 294, 81-99
Handle: RePEc:iza:izadps:dp679

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Keywords: linked employer-employee data; wage; establishment age; Germany;

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References

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  1. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
  2. Charles Brown & James L. Medoff, 2001. "Firm Age and Wages," NBER Working Papers 8552, National Bureau of Economic Research, Inc.
  3. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  4. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
  5. 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.
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Citations

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Cited by:
  1. Schnabel, Claus, 2005. "Gewerkschaften und Arbeitgeberverbände: Organisationsgrade, Tarifbindung und Einflüsse auf Löhne und Beschäftigung," Discussion Papers 34, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  2. Christophe Muller & Christophe Nordman, 2004. "Which Human Capital Matters for Rich and Poor’s Wages?Evidence from Matched Worker-Firm Data from Tunisia," Working Papers DT/2004/09, DIAL (Développement, Institutions et Mondialisation), revised Oct 2004.
  3. Arrantz-Aperte, Laura & Heshmati, Almas, 2003. "Determinants of Profit Sharing in the Finnish Sector," Working Papers 492, Hanken School of Economics.
  4. Muller, Christophe & Nordman, Christophe Jalil, 2011. "Within-Firm Human Capital Externalities in Tunisia," Economics Papers from University Paris Dauphine 123456789/10593, Paris Dauphine University.
  5. John T. Addison & Paulino Teixeira & Thomas Zwick, 2006. "The Impact of Works Councils on Wages," GEMF Working Papers 2006-08, GEMF - Faculdade de Economia, Universidade de Coimbra.
  6. Arranz-Aperte, Laura & Heshmati, Almas, 2003. "Determinants of Profit Sharing in the Finnish Corporate Sector," IZA Discussion Papers 776, Institute for the Study of Labor (IZA).
  7. Brixy, Udo & Kohaut, Susanne & Schnabel, Claus, 2004. "Do newly founded firms pay lower wages? : first evidence from Germany," IAB Discussion Paper 200404, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  8. Brixy, Udo & Kohaut, Susanne & Schnabel, Claus, 2005. "How fast do newly founded firms mature? : empirical analyses on job quality in start-ups," IAB Discussion Paper 200502, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  9. Alda, Holger & Bender, Stefan & Gartner, Hermann, 2005. "The linked employer-employee dataset of the IAB (LIAB)," IAB Discussion Paper 200506, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  10. Addison, John T. & Teixeira, Paulino & Zwick, Thomas, 2006. "Works Councils and the Anatomy of Wages," IZA Discussion Papers 2474, Institute for the Study of Labor (IZA).
  11. Christophe Muller, Christophe J. Nordman, 2008. "Intra-Firm Human Capital Externalities in Tunisia," THEMA Working Papers 2008-38, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.

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