Alcala, Francisco and Hernandez, Pedro J. (2005): Firm characteristics, labor sorting, and wages.
Download (535kB) | Preview
We analyze in a simple model the consequences of efficiency heterogeneity at the firm level for the sorting of workers with different skills into firms with different characteristics. We show that more efficient firms tend to produce higher quality output in equilibrium, which then translates into higher relative demand of education and unmeasured skills. The model provides an integrated explanation within a competitive framework for the observed correlations between several establishment characteristics (size, employees’ average education, capital/labor ratio, and remoteness of selling markets) and average wages. We test the implications of the model using Spanish employer-employee matched data that allow to simultaneously control for establishment and worker characteristics. We find that average education in the establishment is increasing in the remoteness of its main market. Establishment’s size, remoteness of main market, and co-workers’ average education have significant, robust and quantitatively important positive joint effects on wages. The national-market orientation effects (with respect to local-market orientation) on labor composition and wages are at least as important as the international-market effects (with respect to national-market orientation). All wage premia are non-decreasing on worker education and most of them are strictly increasing, suggesting that unmeasured skills are relatively more important for high-education workers.
|Item Type:||MPRA Paper|
|Institution:||Universidad de Murcia|
|Original Title:||Firm characteristics, labor sorting, and wages|
|Keywords:||Quality Competition; Exporting Firms; Unobservable Skills; Wages|
|Subjects:||J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials
|Depositing User:||Francisco Alcala|
|Date Deposited:||20. Dec 2006|
|Last Modified:||17. Feb 2013 17:21|
Abowd, J.M., Kramarz, F. and Margolis, D.N. (1999): "High Wage Workers and High Wage Firms", Econometrica, 67 (2), 251-333. Abowd, J.M., Kramarz, F. (1999): "The Analysis of Labor Markets using Matched Employer-Employee Data", in O.C. Ashenfelter and D. Card (editors), Handbook of Labor Economics, Elsevier, Amsterdam, The Netherlands, vol. 3B, 2629-2710. Arai, M. (2003): “Wages, Profits, and Capital Intensity: Evidence from Matched Worker-Firm Data,” Journal of Labor Economics, 21(3), 593-618. Bayard, K. and Troske, K.R. (1999): “Examining the Employer-Size Wage Premium in the Manufacturing, Retail Trade, and Service Industries Using Employer-Employee Matched Data”, American Economic Review, Papers and Proceedings, 89 (2), 99-103. Battu, H., Belfield C.R. and Sloane, P.J. (2003): “Human Capital Spill-Overs Within the Workplace”, Oxford Bulletin of Economics and Statistics, 65 (5), 575-594. Bernard, A.B., J. Eaton, J.B. Jensen, and S.S. Kortum (2003): “Plants and Productivity in International Trade,” American Economic Review, 93, 1268-1290. Bernard, A.B., and Jensen, J.B. (1995): "Exporters, Jobs, and Wages in U.S. Manufacturing: 1976-1987," Brookings Papers on Economic Activity, Microeconomics, 67-119. Bernard, A.B., and Jensen, J.B. (1997): “Exporters, Skill Upgrading, and the Wage Gap,” Journal of International Economics, 42, 3-31. Bernard, A.B. and Jensen, J.B. (1999): “Exceptional exporter performance: cause, effect, or both?” Journal of International Economics, 47, 1-25. Bernard, A.B., and Wagner, J. (1997): "Exports and Success in German Manufacturing." Weltwirtschaftliches Archiv/Review of World Economics, 133, 134-157. Card, D., and De la Rica, S. (2006): "The effect of Firm-level Contracts on the Structure of Wages: Evidence from Matched Employer-Employee Data," forthcoming in Industrial and Labor Relations Review. Idson, T.L., and Oi, W.Y., (1999): "Workers Are More Productive in Large Firms," American Economic Review, 89, 104-108. Lallemand, T., Plasman, R., and Rycx, F. (2005): “The Establishment-Size Wage Premium: Evidence From European Countries,” DULBEA Working Paper No 05-07.RS, Université Libre de Bruxelles. Maurin, E., Thesmar, D. and Thoening, M. (2002): “Globalization and the Demand for Skill: an Export Based Channel”, CEPR Discussion Paper Series No. 3406, London. Melitz, M.J. (2003): “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,” Econometrica, 71, 1695-1725. Oi, W.Y. and Idson, T.L. (1999): “Firm size and wages”, in O.C. Ashenfelter and D. Card (editors), Handbook of Labor Economics, Elsevier, Amsterdam, The Netherlands, vol. 3B:2165-2214. Schank, T., Schnabel C., and Wagner, J. (2006): “Do exporters really pay higher wages? First evidence from German linked employer-employee data,” University of Lüneburg Working Paper Series in Economics No. 28. Stokey, N.L. (1991): “Human Capital, Product Quality, and Growth,” Quarterly Journal of Economics, 106(2), 587-616 Troske, K.R. (1999): “Evidence on the Employer Size-Wage Premium from Worker-Establishment Matched Data”, Review of Economics and Statistics, vol. 81(1), 15-26.
Available Versions of this Item
- Firm characteristics, labor sorting, and wages. (deposited 20. Dec 2006) [Currently Displayed]