Abstract

https://ssrn.com/abstract=2540321
 


 



Wage Inequality and Firm Growth


Holger M. Mueller


New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Paige Parker Ouimet


University of North Carolina at Chapel Hill

Elena Simintzi


University of British Columbia

February 1, 2015


Abstract:     
We examine how within-firm skill premia – wage differentials associated with jobs involving different skill requirements – vary both across firms and over time. Our firm-level results mirror patterns found in aggregate wage trends, except that we find them with regard to increases in firm size. In particular, we find that wage differentials between high- and either medium- or low-skill jobs increase with firm size, while those between medium- and low-skill jobs are either invariant to firm size or, if anything, slightly decreasing. We find the same pattern within firms over time, suggesting that rising wage inequality – even nuanced patterns, such as divergent trends in upper- and lower-tail inequality – may be related to firm growth. We explore two possible channels: i) wages associated with “routine” job tasks are relatively lower in larger firms due to a higher degree of automation in these firms, and ii) larger firms pay relatively lower entry-level managerial wages in return for providing better career opportunities. Lastly, we document a strong and positive relation between within-country variation in firm growth and rising wage inequality for a broad set of developed countries. In fact, our results suggest that part of what may be perceived as a global trend toward more wage inequality may be driven by an increase in employment by the largest firms in the economy.

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Date posted: December 20, 2014 ; Last revised: February 2, 2017

Suggested Citation

Mueller, Holger M. and Ouimet, Paige Parker and Simintzi, Elena, Wage Inequality and Firm Growth (February 1, 2015). Available at SSRN: https://ssrn.com/abstract=2540321 or http://dx.doi.org/10.2139/ssrn.2540321

Contact Information

Holger M. Mueller
New York University (NYU) - Department of Finance ( email )
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0341 (Phone)
212-995-4233 (Fax)
HOME PAGE: http://www.stern.nyu.edu/~hmueller/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Paige Parker Ouimet (Contact Author)
University of North Carolina at Chapel Hill ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States

Elena Simintzi
University of British Columbia ( email )
2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
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