Pay, Employment, and Dynamics of Young Firms

Babina, Tania and Ma, Wenting and Moser, Christian and Ouimet, Paige and Zarutskie, Rebecca (2019): Pay, Employment, and Dynamics of Young Firms.

Abstract

Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms.

• Item Type: MPRA Paper
• Language: English
• Keywords: Young-Firm Pay Premium, Selection, Worker and Firm Heterogeneity, Firm Dynamics, Startups
• Subjects: D - Microeconomics > D2 - Production and Organizations; D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M13 - New Firms ; Startups

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