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Firm Size, Wages and Unobserved Skills: Evidence from Dual Job Holdings in the UK

  • Alexander Muravyev

The paper examines the labour quality explanation of the employer size-wage gap: larger firms pay higher wages because they employ more skilled workers. Most previous studies control for unobserved skills of workers using longitudinal data and the fixed effects estimator thus relying on a questionable assumption of time-invariant unobserved individual heterogeneity. This paper releases this assumption by using a sample of workers who simultaneously hold two jobs; hence, identification is achieved by differencing across two jobs held at the same time rather than in different periods. A caveat of this approach is possible heterogeneity of the two jobs; this issue is discussed in details in the paper. Based on data from the UK Quarterly Labour Force Survey, this study finds little support for the labour quality explanation: controlling for unobserved skills in the sample of moonlighters does not reduce the estimate of the wage gap.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.55863.de/dp681.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 681.

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Length: 38 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp681
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  18. Albaek, Karsten & Arai, Mahmood & Asplund, Rita & Barth, Erling & Strojer Madsen, Erik, 1998. "Measuring wage effects of plant size," Labour Economics, Elsevier, vol. 5(4), pages 425-448, December.
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  24. Böheim, René & Taylor, Mark P., 2004. "And in the Evening She's a Singer with the Band – Second Jobs, Plight or Pleasure?," IZA Discussion Papers 1081, Institute for the Study of Labor (IZA).
  25. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "The establishment-size wage premium: evidence from European countries," DULBEA Working Papers 05-07.RS, ULB -- Universite Libre de Bruxelles.
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  28. Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S74-S103, Part II, .
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  30. João Carlos Cerejeira da Silva, 2004. "Estimating the employer size-wage premium in a panel data model with comparative advantage and non-random selection," NIPE Working Papers 6/2004, NIPE - Universidade do Minho.
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