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Is Industry Size a Carrier for Wage Inequality? A Panel Study Addressing Independent Variables of Inherently Different Sizes across Units

Author

Listed:
  • Jarle Aarstad

    (Mohn Centre for Innovation and Regional Development, Western Norway University of Applied Sciences, P.O. Box 7030, NO-5020 Bergen, Norway)

  • Olav Andreas Kvitastein

    (Mohn Centre for Innovation and Regional Development, Western Norway University of Applied Sciences, P.O. Box 7030, NO-5020 Bergen, Norway)

Abstract

We address how independent variables of inherently different sizes across units, e.g., small vs. large industries, in panel regression is an advantage interpretively. Analyzing a Norwegian industry panel, we find that wage inequality is a function of industry size, particularly size increase, in an absolute number of firms. A possible reason is that specialized skilled employees negotiate higher wages when there are many legal entities. The findings can also imply that wage inequality is more sensitive to random change, particularly an increase, in large rather than small industries. We conclude that particularly large industries are positive carriers of wage inequality and discuss potential underlying causal mechanisms such as monopolistic competition.

Suggested Citation

  • Jarle Aarstad & Olav Andreas Kvitastein, 2021. "Is Industry Size a Carrier for Wage Inequality? A Panel Study Addressing Independent Variables of Inherently Different Sizes across Units," JRFM, MDPI, vol. 14(9), pages 1-9, September.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:9:p:436-:d:632056
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    References listed on IDEAS

    as
    1. Jarle Aarstad & Olav A. Kvitastein, 2021. "Do Operating Profits Induce a Wage Premium Equally Shared among Employees Earning High or Low Incomes?," Economies, MDPI, vol. 9(2), pages 1-7, May.
    2. Mitra, Aparna, 2003. "Establishment size, employment, and the gender wage gap," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(3), pages 317-330, July.
    3. Strittmatter, Anthony & Wunsch, Conny, 2021. "The Gender Pay Gap Revisited with Big Data: Do Methodological Choices Matter?," Working papers 2021/05, Faculty of Business and Economics - University of Basel.
    4. Luciano Lopez & Sylvain Weber, 2017. "Testing for Granger causality in panel data," Stata Journal, StataCorp LP, vol. 17(4), pages 972-984, December.
    5. Sang-yoon Song, 2020. "Employer Size and Wage Inequality: Rent-Sharing Role of Performance Pay," Korean Economic Review, Korean Economic Association, vol. 36, pages 415-444.
    6. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    7. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
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