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The Productivity-Wage Premium: Does Size Still Matter in a Service Economy?

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  • Giuseppe Berlingieri
  • Sara Calligaris
  • Chiara Criscuolo

Abstract

The literature has established two robust stylized facts: (i) the existence of a firm size-wage premium and (ii) a positive relationship between firm size and productivity. However, the existing evidence is mainly based on manufacturing, which nowadays accounts for a small share of the economy. Using a unique micro-aggregated dataset covering 17 countries over 1994–2012, this paper compares these relationships across sectors. While the size-wage and size-productivity premia are significantly weaker in market services compared to manufacturing, the link between wages and productivity is stronger. In a service economy the stylized fact is a "productivity-wage premium" rather than a "size-wage premium."

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  • Giuseppe Berlingieri & Sara Calligaris & Chiara Criscuolo, 2018. "The Productivity-Wage Premium: Does Size Still Matter in a Service Economy?," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 328-333, May.
    • Handle: RePEc:aea:apandp:v:108:y:2018:p:328-33
    Note: DOI: 10.1257/pandp.20181068
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    2. Berlingieri, Giuseppe & Blanchenay, Patrick & Criscuolo, Chiara, 2024. "The great divergence(s)," Research Policy, Elsevier, vol. 53(3).
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    10. Audra Bowlus & Émilien Gouin‐Bonenfant & Huju Liu & Lance Lochner & Youngmin Park, 2022. "Four decades of Canadian earnings inequality and dynamics across workers and firms," Quantitative Economics, Econometric Society, vol. 13(4), pages 1447-1491, November.
    11. Mattsson, Pontus & Reshid, Abdulaziz, 2023. "Productivity divergence and the role of digitalisation," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 942-966.
    12. Timothy DESTEFANO & HANEDA Sho & KWON Hyeog Ug, 2019. "Determinants of Structural Adjustment and Employment Use in Japan: Firm Characteristics, Offshoring and Industrial Robotics," Discussion papers 19067, Research Institute of Economy, Trade and Industry (RIETI).
    13. Cirera, Xavier & Martins-Neto, Antonio Soares, 2023. "Do innovative firms pay higher wages? Micro-level evidence from Brazil," Research Policy, Elsevier, vol. 52(1).
    14. Aleksandra Kordalska & Magdalena Olczyk, 2020. "What fosters firm-level labour productivity in Eastern European and Central Asian countries?," Bank i Kredyt, Narodowy Bank Polski, vol. 51(1), pages 91-120.
    15. Ai Oku & Shun Inoue & Tsubasa Masui, 2020. "Does Firm Size Effect Wages and Labor productivity? -Micro data analysis in case of Japan-," Discussion papers ron320, Policy Research Institute, Ministry of Finance Japan.
    16. Peter Bauer & Igor Fedotenkov & Aurelien Genty & Issam Hallak & Peter Harasztosi & David Martinez Turegano & David Nguyen & Nadir Preziosi & Ana Rincon-Aznar & Miguel Sanchez Martinez, 2020. "Productivity in Europe: Trends and drivers in a service-based economy," JRC Research Reports JRC119785, Joint Research Centre.
    17. Criscuolo, Chiara & Andrews, Dan & Gal, Peter N., 2019. "The best versus the rest: divergence across firms during the global productivity slowdown," LSE Research Online Documents on Economics 103405, London School of Economics and Political Science, LSE Library.
    18. Porcher, Charly & Rubinton, Hannah & Santamaría, Clara, 2023. "JUE insight: The role of establishment size in the city-size earnings premium," Journal of Urban Economics, Elsevier, vol. 136(C).
    19. Yoshimichi Murakami, 2021. "Trade liberalization and wage inequality: Evidence from Chile," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(3), pages 407-438, April.
    20. Matteo Alpino & Irene Di Marzio & Maurizio Lozzi & Vincenzo Mariani, 2022. "Labor market spillovers of a large plan opening. Evidence from the oil industry," Temi di discussione (Economic working papers) 1386, Bank of Italy, Economic Research and International Relations Area.
    21. Charly Porcher & Hannah Rubinton & Clara Santamaría, 2020. "The Role of Establishment Size in the City-Size Earnings Premium," Working Papers 2020-029, Federal Reserve Bank of St. Louis, revised 29 Nov 2022.
    22. Garnadt, Niklas & von Rueden, Christina & Thiel, Esther, 2021. "Labour reallocation dynamics in Germany during the COVID-19 pandemic and past recessions," Working Papers 08/2021, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • 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
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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