IDEAS home Printed from https://ideas.repec.org/p/ulb/ulbeco/2013-8735.html
   My bibliography  Save this paper

The establishment-size wage premium: evidence from European countries

Author

Listed:
  • Thierry Lallemand
  • Robert Plasman
  • François Rycx

Abstract

This study examines the magnitude and determinants of the establishment-size wage premium in five European countries using a unique harmonised matched employer-employee data set (the 1995 European Structure of Earnings Survey). This data set enables to test the validity of various traditional explanations of the size wage gap (i.e. the labour quality hypothesis, the theory of compensating wage differentials, the role of monitoring and institutions) and of more recent hypotheses (i.e. size differences in job stability and in the concentration of skilled workers). We find some support for traditional explanations, but there remains a significant wage premium for workers employed in large establishments. Further results indicate that the magnitude of this premium fluctuates substantially across countries and appears to be negatively correlated with the degree of corporatism.

Suggested Citation

  • Thierry Lallemand & Robert Plasman & François Rycx, 2007. "The establishment-size wage premium: evidence from European countries," ULB Institutional Repository 2013/8735, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/8735
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brenda Gannon & Robert Plasman & Francois Rycx & Ilan Tojerow, 2007. "Inter-Industry Wage Differentials and the Gender Wage Gap: Evidence from European Countries," The Economic and Social Review, Economic and Social Studies, vol. 38(1), pages 135-155.
    2. Plasman, Robert & Rusinek, Michael & Rycx, François, 2006. "Wages and the Bargaining Regime under Multi-level Bargaining: Belgium, Denmark and Spain," IZA Discussion Papers 1990, Institute of Labor Economics (IZA).
    3. Walter Y. Oi & Todd L. Idson, 1999. "Workers Are More Productive in Large Firms," American Economic Review, American Economic Association, vol. 89(2), pages 104-108, May.
    4. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492, National Bureau of Economic Research, Inc.
    5. repec:bla:econom:v:50:y:1983:i:198:p:175-81 is not listed on IDEAS
    6. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 11, pages 973-1041, Elsevier.
    7. Knut Gerlach & OLAF HÜBLER, 1998. "Firm Size and Wages in Germany – Trends and Impacts of Mobility," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 25(3), pages 245-261, January.
    8. repec:bla:econom:v:62:y:1995:i:245:p:89-107 is not listed on IDEAS
    9. Leeth, John D & Ruser, John, 2003. "Compensating Wage Differentials for Fatal and Nonfatal Injury Risk by Gender and Race," Journal of Risk and Uncertainty, Springer, vol. 27(3), pages 257-277, December.
    10. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    11. Josef Zweimuller & Rudolf Winter-Ebmer, 1999. "Firm-Size Wage Differentials in Switzerland: Evidence from Job-Changers," American Economic Review, American Economic Association, vol. 89(2), pages 89-93, May.
    12. Schmidt, Christoph M & Zimmermann, Klaus F, 1991. "Work Characteristics, Firm Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 705-710, November.
    13. Edward P. Lazear, 2009. "Firm-Specific Human Capital: A Skill-Weights Approach," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 914-940, October.
    14. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    15. Hartog, Joop & Leuven, Edwin & Teulings, Coen, 2002. "Wages and the bargaining regime in a corporatist setting: the Netherlands," European Journal of Political Economy, Elsevier, vol. 18(2), pages 317-331, June.
    16. Greenwald, Bruce C., 1983. "A general analysis of bias in the estimated standard errors of least squares coefficients," Journal of Econometrics, Elsevier, vol. 22(3), pages 323-338, August.
    17. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
    18. Fathi Fakhfakh & Felix Fitzroy, 2006. "Dynamic Monopsony: Evidence from a French Establishment Panel," Economica, London School of Economics and Political Science, vol. 73(291), pages 533-545, August.
    19. Garen, John E, 1985. "Worker Heterogeneity, Job Screening, and Firm Size," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 715-739, August.
    20. Masters, Stanley H, 1969. "An Interindustry Analysis of Wages and Plant Size," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 341-345, August.
    21. Alan Manning & Barbara Petrongolo, 2005. "The Part-Time Pay Penalty," CEP Discussion Papers dp0679, Centre for Economic Performance, LSE.
    22. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084, Elsevier.
    23. Meagher, Kieron J. & Wilson, Hugh, 2004. "Different firm size effects on wages for supervisors and workers," Economics Letters, Elsevier, vol. 84(2), pages 225-230, August.
    24. Martijn P. Tummers & Isolde Woittiez, 1991. "A Simultaneous Wage and Labor Supply Model with Hours Restrictions," Journal of Human Resources, University of Wisconsin Press, vol. 26(3), pages 393-423.
    25. Kenneth R. Troske, 1999. "Evidence On The Employer Size-Wage Premium From Worker-Establishment Matched Data," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 15-26, February.
    26. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    27. Walter Oi, 1983. "The Fixed Employment Costs of Specialized Labor," NBER Chapters, in: The Measurement of Labor Cost, pages 63-122, National Bureau of Economic Research, Inc.
    28. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    29. Síle O'Dorchai & Robert Plasman & François Rycx, 2007. "The part‐time wage penalty in European countries: how large is it for men?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 28(7), pages 571-603, October.
    30. Brunello, Giorgio & Colussi, Aldo, 1998. "The employer size-wage effect: evidence from Italy," Labour Economics, Elsevier, vol. 5(2), pages 217-230, June.
    31. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1996. "Wages, Profits, and Rent-Sharing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 227-251.
    32. Idson, Todd L & Feaster, Daniel J, 1990. "A Selectivity Model of Employer-Size Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 99-122, January.
    33. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    34. Nicola‐Maria Riley, 1997. "Determinants of Union Membership: A Review," LABOUR, CEIS, vol. 11(2), pages 265-301, June.
    35. Alexander Muravyev, 2007. "Firm Size, Wages and Unobserved Skills: Evidence from Dual Job Holdings in the UK," Discussion Papers of DIW Berlin 681, DIW Berlin, German Institute for Economic Research.
    36. repec:bla:econom:v:65:y:1998:i:260:p:507-34 is not listed on IDEAS
    37. Hall, Peter A. & Franzese, Robert J., 1998. "Mixed Signals: Central Bank Independence, Coordinated Wage Bargaining, and European Monetary Union," International Organization, Cambridge University Press, vol. 52(3), pages 505-535, July.
    38. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    39. François Rycx & Ilan Tojerow, 2004. "Rent sharing and the gender wage gap in Belgium," International Journal of Manpower, Emerald Group Publishing Limited, vol. 25(3/4), pages 279-299, April.
    40. repec:bla:econom:v:60:y:1993:i:238:p:125-42 is not listed on IDEAS
    41. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    42. Ana Ferrer & Stéphanie Lluis, 2008. "Should Workers Care about Firm Size?," ILR Review, Cornell University, ILR School, vol. 62(1), pages 104-125, October.
    43. repec:ulb:ulbeco:2013/138902 is not listed on IDEAS
    44. Paul Fenn & Simon Ashby, 2004. "Workplace Risk, Establishment Size and Union Density," British Journal of Industrial Relations, London School of Economics, vol. 42(3), pages 461-480, September.
    45. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214, Elsevier.
    46. Albaek, Karsten & Arai, Mahmood & Asplund, Rita & Barth, Erling & Strojer Madsen, Erik, 1998. "Measuring wage effects of plant size," Labour Economics, Elsevier, vol. 5(4), pages 425-448, December.
    47. Paula B. Voos, 1983. "Union Organizing: Costs and Benefits," ILR Review, Cornell University, ILR School, vol. 36(4), pages 576-591, July.
    48. Brenda Gannon & Brian Nolan, 2004. "Inter-Industry Wage Differentials in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 35(2), pages 157-182.
    49. Green, Francis & Machin, Stephen & Manning, Alan, 1996. "The Employer Size-Wage Effect: Can Dynamic Monopsony Provide an Explanation?," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 433-455, July.
    50. Madalozzo, Regina, 2002. "The Firm Size Wage Premium: A Quantile Analysis," Insper Working Papers wpe_17, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    51. Akbarpour, Mohammad & Kapor, Adam & Neilson, Christopher & van Dijk, Winnie & Zimmerman, Seth, 2022. "Centralized School choice with unequal outside options," Journal of Public Economics, Elsevier, vol. 210(C).
    52. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-433, June.
    53. Jack E. Triplett, 1983. "The Measurement of Labor Cost," NBER Books, National Bureau of Economic Research, Inc, number trip83-1.
    54. Timothy Dunne & James A Schmitz Jr., 1992. "Wages, Employer Size-Wage Premia and Employment Structure: Their Relationship to Advanced-Technology Usage at U.S. Manufacturing Establishments," Working Papers 92-15, Center for Economic Studies, U.S. Census Bureau.
    55. Kenneth R. Troske & Kimberly Bayard, 1999. "Examining the Employer-Size Wage Premium in the Manufacturing, Retail Trade, and Service Industries Using Employer-Employee Matched Data," American Economic Review, American Economic Association, vol. 89(2), pages 99-103, May.
    56. João Carlos Cerejeira da Silva, 2004. "Estimating the employer size-wage premium in a panel data model with comparative advantage and non-random selection," NIPE Working Papers 6/2004, NIPE - Universidade do Minho.
    57. Rene Morissette, 1993. "Canadian Jobs and Firm Size: Do Smaller Firms Pay Less?," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 159-174, February.
    58. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
    59. repec:ulb:ulbeco:2013/134390 is not listed on IDEAS
    60. repec:ulb:ulbeco:2013/134392 is not listed on IDEAS
    61. Síle O'Dorchai & Robert Plasman & François Rycx, 2007. "The part-time wage penalty in European countries: how large is it for men?," International Journal of Manpower, Emerald Group Publishing, vol. 28(7), pages 571-603, November.
    62. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
    63. François Rycx & Ilan Tojerow & Robert Plasman, 2004. "Rent sharing and the gender wage gap in Belgium," ULB Institutional Repository 2013/785, ULB -- Universite Libre de Bruxelles.
    64. Dan A. Black & Brett J. Noel & Zheng Wang, 1999. "On-the-Job Training, Establishment Size, and Firm Size: Evidence for Economies of Scale in the Production of Human Capital," Southern Economic Journal, John Wiley & Sons, vol. 66(1), pages 82-100, July.
    65. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
    66. Yoram Barzel, 1973. "The Determination of Daily Hours and Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(2), pages 220-238.
    67. Ekberg, John & Salabasis, Mickael, 2001. "The Firm Size Effect: fact or artifact?," SSE/EFI Working Paper Series in Economics and Finance 462, Stockholm School of Economics.
    68. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1383-1435.
    69. Barron, John M & Black, Dan A & Loewenstein, Mark A, 1987. "Employer Size: The Implications for Search, Training, Capital Investment, Starting Wages, and Wage Growth," Journal of Labor Economics, University of Chicago Press, vol. 5(1), pages 76-89, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thierry Lallemand & François Rycx, 2007. "Employer Size and the Structure of Wages: A Critical Survey," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 75-87.
    2. Majumdar, Sumit K., 2010. "Institutional changes, firm size and wages in the telecommunications sector," Information Economics and Policy, Elsevier, vol. 22(3), pages 201-217, July.
    3. Colin Green & John S. Heywood & Nikolaos Theodoropoulos, 2017. "Employer size and supervisor earnings: Evidence from Britain," University of Cyprus Working Papers in Economics 04-2017, University of Cyprus Department of Economics.
    4. Binnur Balkan & Semih Tumen, 2016. "Firm-Size Wage Gaps along the Formal-Informal Divide: Theory and Evidence," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(2), pages 235-266, April.
    5. Robert Plasman & François Rycx & Ilan Tojerow, 2006. "Industry wage differentials, unobserved ability, and rent-sharing : Evidence from matched worker-firm data, 1995-2002," Working Paper Research 90, National Bank of Belgium.
    6. Robert Plasman & François Rycx & Ilan Tojerow, 2007. "Wage differentials in Belgium: the role of worker and employer characteristics," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 11-40.
    7. Jeremy T. Fox, 2009. "Firm-Size Wage Gaps, Job Responsibility, and Hierarchical Matching," Journal of Labor Economics, University of Chicago Press, vol. 27(1), pages 83-126, January.
    8. Gilles Margirier, 2007. "Taille des entreprises et salaires," Économie et Prévision, Programme National Persée, vol. 180(4), pages 39-58.
    9. Colin P. Green & John S. Heywood & Nikolaos Theodoropoulos, 2021. "Hierarchy and the Employer Size Effect on Wages: Evidence from Britain," Economica, London School of Economics and Political Science, vol. 88(351), pages 671-696, July.
    10. Therry Lallemand & François Rycx, 2006. "Establishment Size and the Dipsersion of Wages: Evidence from european Countries," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(4), pages 309-336.
    11. Robert Plasman & François Rycx & Ilan Tojerow, 2006. "Industry wage differentials, unobserved ability, and rent-sharing: evidence from matched employer-employee, 1992-2005," DULBEA Working Papers 06-14.RS, ULB -- Universite Libre de Bruxelles.
    12. Philip Du Caju & François Rycx & Ilan Tojerow, 2011. "Inter‐Industry Wage Differentials: How Much Does Rent Sharing Matter?," Manchester School, University of Manchester, vol. 79(4), pages 691-717, July.
    13. Alexander Muravyev, 2007. "Firm Size, Wages and Unobserved Skills: Evidence from Dual Job Holdings in the UK," Discussion Papers of DIW Berlin 681, DIW Berlin, German Institute for Economic Research.
    14. Gizem Akar & Binnur Balkan & Semih Tümen, 2013. "Overview of Firm-Size and Gender Pay Gaps in Turkey: The Role of Informal Employment," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 2(3), pages 1-21, September.
    15. Måns Söderbom & Francis Teal & Anthony Wambugu, 2002. "Does firm size really affect earnings?," CSAE Working Paper Series 2002-08, Centre for the Study of African Economies, University of Oxford.
    16. Albaek, Karsten & Arai, Mahmood & Asplund, Rita & Barth, Erling & Strojer Madsen, Erik, 1998. "Measuring wage effects of plant size," Labour Economics, Elsevier, vol. 5(4), pages 425-448, December.
    17. Vincenzo Scoppa, 2014. "Firm Size and Wages in Italy: Evidence from Exogenous Job Displacements," Manchester School, University of Manchester, vol. 82(6), pages 677-700, December.
    18. Lixin Cai & C. Jeffrey Waddoups, 2009. "The Role of Unobserved Heterogeneity and On-the-Job Training in the Employer Size-Wage Effect: Evidence from Australia," Working Papers 0915, University of Nevada, Las Vegas , Department of Economics.
    19. Philip Du Caju & François Rycx & Ilan Tojerow, 2012. "Wage structure effects of international trade in a small open economy: the case of Belgium," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 297-331, June.
    20. Alexander Muravyev, 2009. "Employer Size, Wages And Unobserved Skills: Evidence From Moonlighters In The Uk," Manchester School, University of Manchester, vol. 77(6), pages 651-674, December.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    Statistics

    Access and download statistics

    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:ulb:ulbeco:2013/8735. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Benoit Pauwels (email available below). General contact details of provider: https://edirc.repec.org/data/ecsulbe.html .

    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.