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

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  • Thierry Lallemand
  • François Rycx

Abstract

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.

Suggested Citation

  • Thierry Lallemand & François Rycx, 2005. "Establishment size and the dispersion of wages: evidence from European Countries," DULBEA Working Papers 05-18.RS, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:dul:wpaper:05-18rs
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    10. Jérôme De Henau & Leila Maron & Danièle Meulders & Sile Padraigin O'Dorchai, 2007. "Travail et maternité en Europe: conditions de travail et politiques publiques," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 63-88.
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    16. Steven J. Davis & Magnus Henrekson, 2010. "Economic Performance and Market Work Activity in Sweden After the Crisis of the Early 1990s," NBER Chapters, in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 225-252, National Bureau of Economic Research, Inc.
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    20. Henrekson, Magnus, 2007. "Entrepreneurship and Institutions," Working Paper Series 707, Research Institute of Industrial Economics.
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    More about this item

    Keywords

    Wage structure; establishment size; decomposition of wages; Europe.;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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