Specialization Matters in the Firm Size-Wage Gap
CEP Discussion Papers from Centre for Economic Performance, LSE
This study applies the O-ring theory to explain the firm-size wage premium. It focuses on the joint role of the division of labor and employee characteristics. Including the firm heterogeneity of occupations in a standard wage regression with individual fixed effect shrinks the size coefficient by a third. Labor productivity follows a similar pattern as wages. The intuition is that individuals who work for large firms focus on a limited number of tasks become more efficient and productive, and earn higher wages. Additional predictions originating from the labor specialization hypothesis receive support from the data.
Keywords: firm size-wage gap; specialization; division of labor (search for similar items in EconPapers)
JEL-codes: J31 L23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1545
Access Statistics for this paper
More papers in CEP Discussion Papers from Centre for Economic Performance, LSE
Bibliographic data for series maintained by ().