Work Characteristics, Firm Size and Wages

Abstract

A positive wage-firm size relationship is well documented in the empirical literature in industrial organization and labor economics. Firm size seems to proxy various unobserved determinants such as job satisfaction, monitoring costs, more complex technologies and worker participation in monopoly profits. It is generally argued that, the greater the possibility of controlling for these latent factors, the less likely that a significant size effect will appear. This paper attempts to distinguish firm size from other wage determinants for a rich data source for West Germany and demonstrates the persistence of the size premium.