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  5. The Productivity-Wage Premium: Does Size Still Matter in a Service Economy?

The Productivity-Wage Premium: Does Size Still Matter in a Service Economy?

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Abstract

The literature has established two robust stylized facts: (i) the existence of a firm size-wage premium and (ii) a positive relationship between firm size and productivity. However, the existing evidence is mainly based on manufacturing, which nowadays accounts for a small share of the economy. Using a unique micro-aggregated dataset covering 17 countries over 1994–2012, this paper compares these relationships across sectors. While the size-wage and size-productivity premia are significantly weaker in market services compared to manufacturing, the link between wages and productivity is stronger. In a service economy the stylized fact is a "productivity-wage premium" rather than a "size-wage premium."

Citation

Berlingieri, Giuseppe, Sara Calligaris, and Chiara Criscuolo. 2018. "The Productivity-Wage Premium: Does Size Still Matter in a Service Economy?" AEA Papers and Proceedings, 108: 328-33. DOI: 10.1257/pandp.20181068

Additional Materials

JEL Classification

  • D22 Firm Behavior: Empirical Analysis
  • D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • L25 Firm Performance: Size, Diversification, and Scope