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Career Consequences of Firm Heterogeneity for Young Workers: First Job and Firm Size

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  • Arellano-Bover, Jaime

    (University of Rome Tor Vergata)

Abstract

I study the long-term effects of landing a first job at a large firm versus a small one using Spanish social security data. Size could be a relevant employer attribute for inexperienced workers since large firms are associated with greater training, higher wages, and enhanced productivity. The key empirical challenge is selection into first jobs – for instance, more able people may land jobs at large firms. I address this challenge developing an instrumental-variables approach that, while keeping business-cycle conditions fixed, leverages variation in the composition of labor demand that labor-market entrants face. I find that initially matching with a larger firm substantially improves long-term outcomes such as lifetime income, and that these benefits persist through subsequent jobs. Additional results point to mechanisms related to search frictions and better skill-development at large firms. Together, these findings shed light on how heterogeneous firms persistently impact young workers' trajectories.

Suggested Citation

  • Arellano-Bover, Jaime, 2020. "Career Consequences of Firm Heterogeneity for Young Workers: First Job and Firm Size," IZA Discussion Papers 12969, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12969
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    18. Till von Wachter, 2020. "The Persistent Effects of Initial Labor Market Conditions for Young Adults and Their Sources," Journal of Economic Perspectives, American Economic Association, vol. 34(4), pages 168-194, Fall.
    19. Christopher Taber & Rune Vejlin, 2020. "Estimation of a Roy/Search/Compensating Differential Model of the Labor Market," Econometrica, Econometric Society, vol. 88(3), pages 1031-1069, May.
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    More about this item

    Keywords

    first job; employer size; firm heterogeneity; young workers; on-the-job skills; lifetime income;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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