The Decomposition of Firm-size Wage Differentials |
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| Authors: | Paul Hettler |
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| Institution: | (1) California University of Pennsylvania, California, PA 15419, USA |
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| Abstract: | No completely satisfactory explanation for the persistent and well-documented large-firm wage premium has been found. I use
a novel adaptation of the Oaxaca/Blinder wage discrimination model to examine the firm-size wage differential which allows
the wage differential to be decomposed into the portions attributable to (1) differences in employee endowments, (2) how the
firm values these endowments, and (3) residual differences. Small firms actually pay higher wages based on how they value
their workers’ endowments, but this wage premium was overshadowed by the superior endowments of workers in large firms and
a residual differential in favor of large firms.
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| Keywords: | Oaxaca/Blinder technique Manufacturing sector Service sector Firm size wage premium |
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