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Is Bigger Still Better? The Decline of the Wage Premium at Large Firms

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Listed:
  • William E. Even

    () (Raymond E. Glos Professor of Economics, Miami University, Oxford, OH 45056, USA)

  • David A. Macpherson

    () (E.M. Stevens Professor of Economics, Trinity University, San Antonio, TX 78212, USA; corresponding author)

Abstract

This study shows that the wage premium paid by large firms fell over the past 20 years and that this decline in the size premium is most pronounced among the least educated workers. Empirical evidence supports several explanations for the shrinking size premium. First, there has been a convergence in the returns to worker characteristics at large and small firms over time. Second, small and large firms are hiring more workers with similar characteristics. Particularly important are the declining share of workers at large manufacturing firms and the rising share of workers at large retail firms. Also, the greater decline of unionism at large firms has contributed significantly to the decline in the size premium.

Suggested Citation

  • William E. Even & David A. Macpherson, 2012. "Is Bigger Still Better? The Decline of the Wage Premium at Large Firms," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1181-1201, April.
  • Handle: RePEc:sej:ancoec:v:78:4:y:2012:p:1181-1201
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    File URL: http://dx.doi.org/10.4284/0038-4038-78.4.1181
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    References listed on IDEAS

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    1. Tan, Hong & Batra, Geeta, 1997. "Technology and Firm Size-Wage Differentials in Colombia, Mexico, and Taiwan (China)," World Bank Economic Review, World Bank Group, vol. 11(1), pages 59-83, January.
    2. 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.
    3. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "Why do large firms pay higher wages? evidence from matched worker-firm data," ULB Institutional Repository 2013/8743, ULB -- Universite Libre de Bruxelles.
    4. Yu, Li & Hurley, Terrance M. & Kliebenstein, James B. & Orazem, Peter F., 2012. "Firm Size, Technical Change, and Wages in the Pork Sector, 1990-2005," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), August.
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    10. Meagher, Kieron J. & Wilson, Hugh, 2004. "Different firm size effects on wages for supervisors and workers," Economics Letters, Elsevier, vol. 84(2), pages 225-230, August.
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    Cited by:

    1. Edison Roy César & François Vaillancourt, 2010. "Does a Specific Union Impact on Wage Increases? Evidence from Canada, 1985-2007," CIRANO Working Papers 2010s-09, CIRANO.
    2. Tempesti, Tommaso, 2015. "Fringe Benefits and Import Competition," MPRA Paper 69842, University Library of Munich, Germany.
    3. Fernando Rios-Avila & Barry T. Hirsch, 2014. "Unions, Wage Gaps, and Wage Dispersion: New Evidence from the Americas," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(1), pages 1-27, January.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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