Human capital and the size distribution of firms

Pedro Gomes and Zoe Kuehn ()

Review of Economic Dynamics, 2017, vol. 26, 164-179

Abstract: Countries with a lower fraction of workers with secondary education have smaller firms. We set up a model of occupational choice where individuals have primary, secondary or tertiary education. A more educated work force raises firm size and productivity. More educated workers earn higher wages, and hence among educated individuals only the more able become entrepreneurs. We find that within the framework of our model, different educational attainments can explain one third of the difference in average firm size between the US and Mexico. While improved educational attainments hence imply an increase in firm size over time, a fall in the price of capital together with capital-skill complementarity acts in the opposite direction, something that can explain a relatively constant average firm size in the US since the late 1970's. Our policy experiments highlight how public employment and the skill bias in public hiring additionally affect firm size and productivity. (Copyright: Elsevier)

Keywords: firm size; educational attainment; entrepreneurship; college premium; high school premium; public employment (search for similar items in EconPapers)
JEL-codes: E24 H30 J24 J45 O11 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2017.03.004
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "Human capital and the size distribution of firms" (2017)
Working Paper: Online Appendix to "Human capital and the size distribution of firms" (2017)
Working Paper: Human Capital and the Size Distribution of Firms (2014)
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: https://EconPapers.repec.org/RePEc:red:issued:14-102

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2017.03.004

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().