Small Employers, Large Employers and the Skill Premium over the Business Cycle
13 Pages Posted: 25 Jul 2015 Last revised: 8 Apr 2016
Date Written: April 7, 2016
For the United States in 1987-2014, I document at business cycle frequencies that the high-skill workers’ employer size wage premium is high (low) in times of low (high) unemployment relative to that of the low-skill workers. Specifically, the differential employer size wage premium between high-skill and low-skill workers has an unconditional correlation of -0.4 with the unemployment rate, and varies by about 6 percent over the business cycle. The skill premium itself does not exhibit a clear business cycle pattern over the sample period.
Keywords: employer size wage premium, skill premium, differential employer size wage premium between skill groups, business cycles
JEL Classification: D22, E32, J31, I26
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