IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v7y2007i1n8.html
   My bibliography  Save this article

Firm Size, Productivity, and Manager Wages: A Job Assignment Approach

Author

Listed:
  • Grossmann Volker

    (University of Fribourg, volker.grossmann@unifr.ch)

Abstract

Ability of managers and other nonproduction professionals is key for the productivity of firms. Hence, the assignment of heterogeneous nonproduction workers across firms determines the distribution of productivity. In turn, the transmission of productivity differences into profit differences -- resulting from product market competition -- determines firms' willingness to pay for higher managerial skills. This paper explores the equilibrium assignment of nonproduction workers across ex ante identical firms which results from this interaction between product market and the market for nonproduction skills. The analysis suggests that, typically, large and productive firms coexist with small, low-productivity firms. Consistent with empirical evidence, a skewed distribution of firm size tends to arise. Moreover, the model predicts a positive relationship of firm size to productivity, manager quality, and manager remuneration. Finally, according to comparative-static analysis, higher intensity of product market competition can account for increases in the compensation at the top of the wage distribution.

Suggested Citation

  • Grossmann Volker, 2007. "Firm Size, Productivity, and Manager Wages: A Job Assignment Approach," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-41, February.
    • Handle: RePEc:bpj:bejtec:v:7:y:2007:i:1:n:8
    DOI: 10.2202/1935-1704.1321
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1935-1704.1321
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1935-1704.1321?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:wsr:wpaper:y:2015:i:148 is not listed on IDEAS
    2. Prettner, Klaus & Strulik, Holger, 2018. "Trade and productivity: The family connection redux," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 276-291.
    3. Ksenija Dencic-Mihajlov, 2014. "Profitability During the Financial Crisis Evidence from the Regulated Capital Market in Serbia," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 12(1), pages 7-33.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:7:y:2007:i:1:n:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.