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Pay, Employment, and Dynamics of Young Firms

Kenan Institute of Private Enterprise Research Paper No. 19-25

56 Pages Posted: 30 Jul 2019 Last revised: 6 Sep 2019

See all articles by Tania Babina

Tania Babina

University of Maryland - Robert H. Smith School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Wenting Ma

University of Massachusetts, Amherst

Christian Moser

Columbia University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Paige Ouimet

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School; European Corporate Governance Institute (ECGI)

Rebecca Zarutskie

Federal Reserve Banks - Federal Reserve Bank of Dallas

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: 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

University of Maryland - Robert H. Smith School of Business ( email )

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://taniababina.com

Wenting Ma

University of Massachusetts, Amherst ( 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

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Paige Ouimet

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

McColl Building
Chapel Hill, NC 27599-3490
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Rebecca Zarutskie

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
Dallas, TX 75265
United States

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