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Specialization matters in the firm size-wage gap

Molina-Domene, Maria (2018) Specialization matters in the firm size-wage gap. CEP Discussion Papers (CEPDP1545). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

This study applies the O-ring theory to explain the firm-size wage premium. It focuses on the joint role of the division of labor and employee characteristics. Including the firm heterogeneity of occupations in a standard wage regression with individual fixed effect shrinks the size coefficient by a third. Labor productivity follows a similar pattern as wages. The intuition is that individuals who work for large firms focus on a limited number of tasks become more efficient and productive, and earn higher wages. Additional predictions originating from the labor specialization hypothesis receive support from the data.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2018 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 26 Jun 2018 16:22
Last Modified: 23 Jan 2020 00:57
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/88696

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