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

  • Thierry Lallemand
  • François Rycx

We investigate how the wage distribution differs among small and large establishments in four European countries (i.e. Belgium, Ireland, Italy and Spain). To do so, we implement the Juhn, Murphy and Pierce (1993) decomposition of wages following the methodology suggested by Lemieux (2002). Findings show that within-establishment wage dispersion rises with size because large employers have a more diverse workforce. In addition they also suggest that smaller establishments more closely link pay to performance. Further results indicate that between-establishment wage dispersion decreases with employer size because smaller establishments are technologically more diversified and hence exhibit greater diversity in average workforce skills.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/8739.

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Date of creation: 2006
Date of revision:
Publication status: Published in: Applied Economics Quarterly (2006) v.52 n° 4,p.309-336
Handle: RePEc:ulb:ulbeco:2013/8739
Contact details of provider: Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
Web page: http://difusion.ulb.ac.be

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  1. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Kenneth R Troske, 1994. "Evidence on the Employer Size-Wage Premium From Worker-Establishment Matched Data," Working Papers 94-10, Center for Economic Studies, U.S. Census Bureau.
  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.
  4. João Carlos Cerejeira da Silva, 2004. "Estimating the employer size-wage premium in a panel data model with comparative advantage and non-random selection," NIPE Working Papers 6/2004, NIPE - Universidade do Minho.
  5. Richard B. Freeman, 1978. "Unionism and the Dispersion of Wages," NBER Working Papers 0248, National Bureau of Economic Research, Inc.
  6. Juan Francisco Canal Domínguez & César Rodríguez Gutiérrez, 2004. "Collective Bargaining and Within-firm Wage Dispersion in Spain," British Journal of Industrial Relations, London School of Economics, vol. 42(3), pages 481-506, 09.
  7. Hibbs Jr., Douglas A. & Locking, Håkan, 2000. "Wage Dispersion and Productive Efficiency: Evidence For Sweden," Working Papers in Economics 21, University of Gothenburg, Department of Economics.
  8. 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.
  9. repec:att:wimass:8904 is not listed on IDEAS
  10. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  11. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
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  13. 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.
  14. Albaek, Karsten & Arai, Mahmood & Asplund, Rita & Barth, Erling & Strojer Madsen, Erik, 1998. "Measuring wage effects of plant size," Labour Economics, Elsevier, vol. 5(4), pages 425-448, December.
  15. Steven J. DAVIS & John HALTIWANGER, 1996. "Employer Size and the Wage Structure in U.S. Manufacturing," Annales d'Economie et de Statistique, ENSAE, issue 41-42, pages 323-367.
  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.
  17. 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.
  18. Greenwald, Bruce C., 1983. "A general analysis of bias in the estimated standard errors of least squares coefficients," Journal of Econometrics, Elsevier, vol. 22(3), pages 323-338, August.
  19. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  20. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
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  23. Richard B. Freeman, 1981. "Union Wage Practices and Wage Dispersion within Establishments," NBER Working Papers 0752, National Bureau of Economic Research, Inc.
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