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Is Bigger Still Better? The Decline of the Wage Premium at Large Firms

Author

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  • Even, William E.

    () (Miami University)

  • Macpherson, David A.

    () (Trinity University)

Abstract

This study shows that the wage premium paid by large firms fell over the past 20 years and that the decline in the size premium has been most pronounced among the least educated work force. Empirical evidence supports several explanations for the decline in the size premium. First, there has been a convergence in the returns to worker characteristics at large and small firms over time. Second, there has been a convergence in the types of workers employed at small and large firms. Particularly important have been changes in the distribution of workers across industries and the greater rate of decline in unionism at large firms.

Suggested Citation

  • Even, William E. & Macpherson, David A., 2009. "Is Bigger Still Better? The Decline of the Wage Premium at Large Firms," IZA Discussion Papers 4082, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4082
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    References listed on IDEAS

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    1. Tan, Hong & Batra, Geeta, 1997. "Technology and Firm Size-Wage Differentials in Colombia, Mexico, and Taiwan (China)," World Bank Economic Review, World Bank Group, vol. 11(1), pages 59-83, January.
    2. 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.
    3. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "Why do large firms pay higher wages? evidence from matched worker-firm data," ULB Institutional Repository 2013/8743, ULB -- Universite Libre de Bruxelles.
    4. Yu, Li & Hurley, Terrance M. & Kliebenstein, James B. & Orazem, Peter F., 2012. "Firm Size, Technical Change, and Wages in the Pork Sector, 1990-2005," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), August.
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    7. Kevin T. Reilly, 1995. "Human Capital and Information: The Employer Size-Wage Effect," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 1-18.
    8. Christopher R. Bollinger & Barry T. Hirsch, 2006. "Match Bias from Earnings Imputation in the Current Population Survey: The Case of Imperfect Matching," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 483-520, July.
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    Cited by:

    1. Fernando Rios-Avila & Barry T. Hirsch, 2014. "Unions, Wage Gaps, and Wage Dispersion: New Evidence from the Americas," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(1), pages 1-27, January.
    2. Edison Roy César & François Vaillancourt, 2010. "Does a Specific Union Impact on Wage Increases? Evidence from Canada, 1985-2007," CIRANO Working Papers 2010s-09, CIRANO.
    3. Tempesti, Tommaso, 2015. "Fringe Benefits and Import Competition," MPRA Paper 69842, University Library of Munich, Germany.

    More about this item

    Keywords

    firm size; fringe benefits; wages;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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