Firm-size wage premiums around the world : evidence from PIAAC : an empirical analysis using PIAAC 2013 data
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Larger firms pay higher wages. In spite of the large and growing importance of the firm-size wage premium, previous attempts to account for this premium using observable worker or firm characteristics have had limited success. This master thesis reports examine the hypothesis that these higher wages are because workers in larger firms are more skilled. The data used comes from the Programme for the International Assesment of Adult Competencies (PIAAC), which in addition to standard labor information, gives a much richer skill measures than those typically available in labor market surveys. The pattern of firm-size effects on wages is measured with and without this these new controls for worker skill, using the 21-country database. I also investigate the interaction between skill variables and firm-size premium, and the premium differences in the public and the private sector. Firm-size premiums are found universally in every country investigated. The results show that controlling for this new skill measures does little to reduce firm-size premiums. The results also show some evidence in that some skills are differently rewarded in larger firms. I also find that, in many countries, firm-size premiums are nonexistent or substantially lower in the public sector compared to the private sector. Last, I find evidence for workers with a higher skill-level sorting into larger firms.