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Career Consequences of Firm Heterogeneity for Young Workers: First Job and Firm Size

Jaime Arellano-Bover ()

No 12969, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: I study the long-term effects of landing a first job at a large firm versus a small one using Spanish social security data. Size could be a relevant employer attribute for inexperienced workers since large firms are associated with greater training, higher wages, and enhanced productivity. The key empirical challenge is selection into first jobs – for instance, more able people may land jobs at large firms. I address this challenge developing an instrumental-variables approach that, while keeping business-cycle conditions fixed, leverages variation in the composition of labor demand that labor-market entrants face. I find that initially matching with a larger firm substantially improves long-term outcomes such as lifetime income, and that these benefits persist through subsequent jobs. Additional results point to mechanisms related to search frictions and better skill-development at large firms. Together, these findings shed light on how heterogeneous firms persistently impact young workers' trajectories.

Keywords: lifetime income; young workers; firm heterogeneity; employer size; first job; on-the-job skills (search for similar items in EconPapers)
JEL-codes: E24 J23 J24 J31 J62 (search for similar items in EconPapers)
Pages: 90 pages
Date: 2020-02
New Economics Papers: this item is included in nep-bec, nep-eur, nep-hrm, nep-lma and nep-mac
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