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The Employer Size-Wage Effect

  • Charles Brown
  • James L. Medoff

We consider six explanations for the positive relationship between employer size and wages -- large employers (1) hire higher quality workers; (2) offer inferior working conditions; (3) make more use of high wages to forestall unionization; (4) have more ability to pay high wages; (5) face smaller pools of applicants relative to vacancies; (6) are less able to monitor their workers. We find some support for the first of these, but there remains a significant wage premium for those working for large employers.

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File URL: http://www.nber.org/papers/w2870.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2870.

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Date of creation: Dec 1989
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Publication status: published as Journal of Political Economy, Vol. 97, No. 5, pp. 1027-1059, (October 1989)
Handle: RePEc:nbr:nberwo:2870
Note: LS
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  1. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
  2. Harry Holzer & Lawrence Katz & Alan Krueger, 1988. "Job Queues and Wages: New Evidence on the Minimum Wage and Inter-Industry Wage Structure," Working Papers 610, Princeton University, Department of Economics, Industrial Relations Section..
  3. Garen, John E, 1985. "Worker Heterogeneity, Job Screening, and Firm Size," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 715-39, August.
  4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  5. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  6. David S. Evans & Linda S. Leighton, 1989. "Why Do Smaller Firms Pay Less?," Journal of Human Resources, University of Wisconsin Press, vol. 24(2), pages 299-318.
  7. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
  8. Richard B. Freeman, 1981. "The effect of unionism on fringe benefits," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(4), pages 489-509, July.
  9. Pugel, Thomas A, 1980. "Profitability, Concentration and the Interindustry Variation in Wages," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 248-53, May.
  10. Weiss, Andrew & Landau, Henry J, 1984. "Wages, Hiring Standards, and Firm Size," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 477-99, October.
  11. Masters, Stanley H, 1969. "An Interindustry Analysis of Wages and Plant Size," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 341-45, August.
  12. James E. Pearce, 1985. "Specific training, unions, and the relationship between employer size and wages," Working Papers 8504, Federal Reserve Bank of Dallas.
  13. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
  14. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
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