Firm Size, Earnings, and Displacement Risk
Analogous to the well-documented firm size-wage differential, there also exists a differential in layoff risk according to firm size. Using Austrian data I discuss several reasons for this puzzle, including on-the-job training and workers' heterogeneity. If less stable (and also less able) workers select themselves into small, unstable, and low-paying firms, predicted layoff risk of workers can be used as a proxy for heterogeneity of workers and therefore be included in wage regressions. Doing this, one half of the size earnings premium can be explained. Copyright 2001 by Oxford University Press.
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Volume (Year): 39 (2001)
Issue (Month): 3 (July)
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