Should Workers Care about Firm Size?

Ana Ferrer () and Stéphanie Lluis ()

Industrial and Labor Relations Review, 2008, vol. 62, issue 1, pages 104-125

Abstract: The authors analyze how firms of different sizes reward measured skills and unmea¬sured ability. The empirical methodology, based on nonlinear instrumental variable estimation, permits direct estimation of the returns to unmeasured ability by firm size. An analysis of panel data from the Canadian Survey of Labour and Income Dynamics for two periods, 1993-1998 and 1996-2001, reveals statistically significant differences between firms of different sizes. In particular, returns to unmeasured ability are higher in medium-sized firms than in either small firms or large firms. The authors find that the firm-size wage gap and the differential in returns to unmeasured ability between small and medium-sized firms is mainly explained by ability sorting. The fact that larger firms reward ability less than medium-sized firms is consistent with an explanation based on monitoring costs. When firms become "too large," monitoring costs may prevent them from rewarding ability directly through wages.

Date: 2008
View citations in EconPapers

Downloads: (external link)
http://digitalcommons.ilr.cornell.edu/ilrreview/vol62/iss1/6 (application/pdf)
At http://digitalcommons.ilr.cornell.edu/ilrreview/, all visitors can get free full text downloads of articles published between April 2003 and 18 months prior to today's date. A subscription is required for full-text downloads of more recent articles. Researchers can find older issues of the Review at http://www.jstore.org.

Related works:
Working Paper: Should Workers Care About Firm Size?
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ilr:articl:v:62:y:2008:i:1:p:104-125

Ordering information: This journal article can be ordered from
621 Ives Hall, Cornell Univ., Ithaca, NY 14853-3901
http://digitalcommons.ilr.cornell.edu/ilrreview/

Access Statistics for this article

Industrial and Labor Relations Review is edited by Tove Hammer

More articles in Industrial and Labor Relations Review from ILR Review, ILR School, Cornell University
Contact information at EDIRC.
Series data maintained by Jami Carlacio ().