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Labor Supply and Firm Size

Author

Listed:
  • Shao, Lin
  • Sohail, Faisal
  • Yurdagul, Emircan

Abstract

Larger firms exhibit i) longer hours worked, ii) higher wages, and iii) smaller (larger) wage penalties for working long (short) hours. We reconcile these patterns in a general equilibrium model, which features the endogenous interaction of hours, wages, and firm size. In the model, workers willing to work longer hours sort into larger firms that offer a wage premium. Complementarities in hours generate wage penalties that increase with the distance from average firm hours. We use the model to argue the importance of the interaction between hours, wages, and firm size for inequality and firm policy.

Suggested Citation

  • Shao, Lin & Sohail, Faisal & Yurdagul, Emircan, 2022. "Labor Supply and Firm Size," CEPR Discussion Papers 17469, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17469
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    Keywords

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    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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