Firm Size Distributions and Cross-Country Labor Market Outcomes

Todd Schoellman, Jianyu Lu and Kevin Donovan
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Jianyu Lu: University of Notre Dame
Kevin Donovan: University of Notre Dame

No 1571, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: It is well-known that developing countries have many fewer large firms and that this has important implications for productivity. In this paper we collect and harmonize labor force surveys from 17 countries at different stages of development to document complementary facts about how the firm size distribution affects labor markets. Workers at large firms earn higher wages, have longer tenures, and enjoy more persistent employment in all countries. The firm size distribution accounts for a moderate fraction of cross-country variation in wages, tenure, and labor market churn. Viewed through the lens of a model of labor market churn, these facts jointly suggest that large firms provide better matches and that poor country labor markets suffer as a result of the missing large firms.

Date: 2017
New Economics Papers: this item is included in nep-bec
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