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Longitudinal Evidence of Firm Size Effect on Wage Premium and Wage Differential in Korean Labor Market

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  • H. Y. Sun

Abstract

This study analyzes the firm size effect on wage determinant mechanism and wage differential between large firms and small firms. The empirical methodology, based on Fixed Effect estimation, Probit estimation and Oaxaca-Blinder decomposition estimation, be utilized to measure wage determinant factors exclude unobservable characteristics heterogeneity and permits to obtain endowment or discrimination proportion of wage gap. Firm size wage premium mostly be attributed to efficiency wage, compensation wage differential, skill complementarity, monitoring cost, prevent union organization, rent sharing and internal market. However, there are no completely explanatory for firm size wage premium. Estimated results suggest that more educated employees are easily to find in large firms, it is consistent with the hypothesis that higher wages paid by large firms can be explained by efficiency theory. Endowment differential is main reason for wage gap between large firms and small firms. Employees have lower turnover rate in large firms than small firms. This phenomenon can be explained by internal labor market theory which means employees have higher probability of promotion and higher costs of turnover in large firms.

Suggested Citation

  • H. Y. Sun, 2014. "Longitudinal Evidence of Firm Size Effect on Wage Premium and Wage Differential in Korean Labor Market," International Journal of Economic Sciences, Prague University of Economics and Business, vol. 2014(3), pages 66-85.
    • Handle: RePEc:prg:jnljes:v:2014:y:2014:i:3:id:17:p:66-85
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    More about this item

    Keywords

    NA; Firm-size wage differential; Korean Labor and Income Panel Study; wage decomposition;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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