Labor Supply and Firm Size

Lin Shao, Faisal Sohail and Emircan Yurdagul

No 17469, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Larger firms exhibit i) longer hours worked, ii) higher wages, and iii) smaller (larger) wage penalties for working long (short) hours. We reconcile these patterns in a general equilibrium model, which features the endogenous interaction of hours, wages, and firm size. In the model, workers willing to work longer hours sort into larger firms that offer a wage premium. Complementarities in hours generate wage penalties that increase with the distance from average firm hours. We use the model to argue the importance of the interaction between hours, wages, and firm size for inequality and firm policy.

Keywords: Labor supply; Hours worked; Firm size; Sorting; Complementarities (search for similar items in EconPapers)
JEL-codes: E23 J22 J23 J31 (search for similar items in EconPapers)
Date: 2022-07
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Working Paper: Labour Supply and Firm Size (2023)
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