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Establishment size and the dispersion of wages: evidence from European Countries

  • Thierry Lallemand
  • François Rycx

This paper investigates how the distribution of wages differs between small and large establishments in four European countries. Findings show that within-establishment wage dispersion rises with size because large employers have a more diverse workforce. They also suggest that screening and monitoring costs imply a lower sensitivity of wages to ability in larger establishments. Smaller establishments are found to rely more on incentive-based pay mechanisms, particularly in countries with a low trade union coverage rate. Further results indicate that between-establishment wage dispersion decreases with employer size because smaller establishments are technologically more diversified and therefore exhibit greater diversity in average workforce skills.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/8763/1/tl-0016.pdf
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Paper provided by ULB -- Universite Libre de Bruxelles in its series DULBEA Working Papers with number 05-18.RS.

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Date of creation: Sep 2005
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Publication status: Published by:
Handle: RePEc:dul:wpaper:05-18rs
Contact details of provider: Web page: http://difusion.ulb.ac.be

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  3. Ana Ferrer & Stéphanie Lluis, 2008. "Should Workers Care about Firm Size?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 62(1), pages 104-125, October.
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  15. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  16. Steve J. Davis & John Haltiwanger, 1991. "Wage Dispersion Between and Within U.S. Manufacturing Plants, 1963-1986," NBER Working Papers 3722, National Bureau of Economic Research, Inc.
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  18. 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.
  19. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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