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Why Do Big Firms Pay Higher Wages? Evidence from an International Database

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  • John Gibson

    (Department of Economics, University of Waikato)

  • Steven Stillman

    (Motu Economic and Public Policy Research)

Abstract

Bigger firms pay higher wages. This note reports tests of the hypothesis that this big-firm premium (BFP) occurs because workers in big firms are more skilled. We use the International Adult Literacy Survey, which gives richer skill measures than those typically available in labor market surveys, to measure the BFP in nine countries with and without controls for worker skill. The results show that the BFP is not as universal as is often suggested, but in countries where it exists controlling for skills does little to reduce the size of the BFP. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • John Gibson & Steven Stillman, 2009. "Why Do Big Firms Pay Higher Wages? Evidence from an International Database," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 213-218, February.
  • Handle: RePEc:tpr:restat:v:91:y:2009:i:1:p:213-218
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    Cited by:

    1. Yongjin Wang & Laixun Zhao, 2013. "Saving Good Jobs under Global Competition by Rewarding Quality and Efforts," Discussion Paper Series DP2013-17, Research Institute for Economics & Business Administration, Kobe University, revised May 2013.
    2. Zhu, Rong, 2011. "NILS Working paper no 170. The impact of major--job mismatch on college graduates' early career earnings," NILS Working Papers 26072, National Institute of Labour Studies.
    3. Aleksandra Majchrowska & Paweł Strawiński, 2016. "Regional Differences in Gender Wage Gaps in Poland: New Estimates Based on Harmonized Data for Wages," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 8(2), pages 115-141, June.
    4. Vincenzo Scoppa, 2014. "Firm Size and Wages in Italy: Evidence from Exogenous Job Displacements," Manchester School, University of Manchester, vol. 82(6), pages 677-700, December.
    5. John Gibson, 2009. "The public sector pay premium, compensating differentials and unions: propensity score matching evidence from Australia, Canada, Great Britain and the United States," Economics Bulletin, AccessEcon, vol. 29(3), pages 2325-2332.
    6. Feng, Shuaizhang, 2009. "Return to Training and Establishment Size: A Reexamination of the Size-Wage Puzzle," IZA Discussion Papers 4143, Institute for the Study of Labor (IZA).
    7. Green, Colin & Heywood, John S. & Theodoropoulos, Nikolaos, 2017. "Employer Size and Supervisor Earnings: Evidence from Britain," GLO Discussion Paper Series 136, Global Labor Organization (GLO).
    8. Rui Baptista & Francisco Lima & Miguel Preto, 2013. "Entrepreneurial skills and workers’ wages in small firms," Small Business Economics, Springer, pages 309-323.
    9. Tina Haussen & Silke Übelmesser, 2015. "No Place Like Home? Graduate Migration in Germany," CESifo Working Paper Series 5524, CESifo Group Munich.
    10. Haußen, Tina & Haussen, Tina, 2016. "Job Changes and Interregional Migration of Graduates," Annual Conference 2016 (Augsburg): Demographic Change 145618, Verein für Socialpolitik / German Economic Association.
    11. Wang, Yongjin & Zhao, Laixun, 2015. "Saving good jobs from global competition by rewarding quality and efforts," Journal of International Economics, Elsevier, pages 426-434.

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