Pay, Employment, and Dynamics of Young Firms

56 Pages Posted: 30 Jul 2019 Last revised: 12 Nov 2019

See all articles by Tania Babina

Tania Babina

Columbia University - Columbia Business School, Finance

Wenting Ma

University of Massachusetts, Amherst-Department of Finance

Christian Moser

Columbia University; Centre for Economic Policy Research (CEPR)

Paige Ouimet

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Rebecca Zarutskie

Board of Governors of the Federal Reserve System

Date Written: July 23, 2019

Abstract

Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms.

Keywords: Young-Firm Pay Premium, Selection, Worker and Firm Heterogeneity, Firm Dynamics, Startups

JEL Classification: J30, J31, D22, E24, M13

Suggested Citation

Babina, Tania and Ma, Wenting and Moser, Christian and Ouimet, Paige and Zarutskie, Rebecca, Pay, Employment, and Dynamics of Young Firms (July 23, 2019). Kenan Institute of Private Enterprise Research Paper No. 19-25, Available at SSRN: https://ssrn.com/abstract=3425596 or http://dx.doi.org/10.2139/ssrn.3425596

Tania Babina

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

Wenting Ma

University of Massachusetts, Amherst-Department of Finance ( email )

121 Presidents Drive
Amherst, MA 01003
United States

Christian Moser (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States
6093564653 (Phone)

HOME PAGE: http://www.economoser.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Paige Ouimet

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Rebecca Zarutskie

Board of Governors of the Federal Reserve System ( email )

20th Street and C Streets NW
Mailstop 155-B
Washington, DC 20551
United States
202-452-5292 (Phone)

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