1887

OECD Science, Technology and Industry Working Papers

The OECD Directorate for Science, Technology and Innovation (STI) leads OECD research on the contribution of science, technology and industry to well-being and economic growth. STI Working Papers cover a broad range of topics including definition and measurement of science and technology indicators, global value chains, and research on policies to promote innovation. These technical or analytical working papers are prepared by staff or outside consultants to share early insights and elicit feedback.

English

The productivity-wage premium

Does size still matter in a service economy?

The literature has established two robust stylised 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 data only. With manufacturing nowadays accounting for a small share of the economy, whether productivity, size, and wages are closely linked, and how tight this link is across sectors, is still an open question. Using a unique micro-aggregated dataset covering the whole economy in 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. The combination of these results suggests that, in a service economy the “size-wage premium” becomes more a “productivity-wage premium”. These results have first-order policy implications for both workers and firms.

English

Keywords: Wages, Size-Premium, Productivity
JEL: J3: Labor and Demographic Economics / Wages, Compensation, and Labor Costs; D2: Microeconomics / Production and Organizations; E2: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error