The Employer Size-Wage Effect

Charles Brown, James L. Medoff

NBER Working Paper No. 2870 (Also Reprint No. r1327)
Issued in December 1989
NBER Program(s):   LS

We consider six explanations for the positive relationship between employer size and wages -- large employers (1) hire higher quality workers; (2) offer inferior working conditions; (3) make more use of high wages to forestall unionization; (4) have more ability to pay high wages; (5) face smaller pools of applicants relative to vacancies; (6) are less able to monitor their workers. We find some support for the first of these, but there remains a significant wage premium for those working for large employers.

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Published: Journal of Political Economy, Vol. 97, No. 5, pp. 1027-1059, (October 1989)

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