Small Employers, Large Employers and the Skill Premium over the Business Cycle

14 Pages Posted: 25 Jul 2015 Last revised: 15 Nov 2018

See all articles by Damir Stijepic

Damir Stijepic

Johannes Gutenberg University Mainz

Date Written: November 14, 2018

Abstract

For the USA in 1987–2017, I document, at business cycle frequencies, that the employer-size wage premium of high-skill workers tends to be high (low) in times of low (high) unemployment relative to that of low-skill workers. The differential size wage premium between high-skill and low-skill workers has an unconditional correlation of –0.6 with the aggregate unemployment rate in 1987–2007. An above-trend increase in the unemployment rate by one percentage point is associated with a decrease in the differential size wage premium by around 1.8–2.3 percentage points. Nevertheless, the skill wage premium is not negatively correlated with aggregate unemployment consistently.

Keywords: employer-size wage premium, skill premium, economic fluctuations, business cycles, Current Population Survey

JEL Classification: D22, E32, J31, I26

Suggested Citation

Stijepic, Damir, Small Employers, Large Employers and the Skill Premium over the Business Cycle (November 14, 2018). Available at SSRN: https://ssrn.com/abstract=2635529 or http://dx.doi.org/10.2139/ssrn.2635529

Damir Stijepic (Contact Author)

Johannes Gutenberg University Mainz ( email )

Jakob-Welder-Weg 9
Mainz, 55128
Germany

HOME PAGE: http://www.damir.stijepic.com

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