Firm Size and Wages in Italy: Evidence from Exogenous Job Displacements

Abstract

We use longitudinal data based on administrative archives from 1985 to 2002 to estimate the relationship between wages and firm size in Italy. By controlling for individual fixed effects, we find that larger firms pay significantly higher wages, although the individual unmeasured ability component accounts for about one half of the uncovered size–wage premium. To reduce potential self‐selection problems arising from endogenous job changes, we focus on a sample of workers displaced by firm closures. By using this sample, we confirm that larger firms pay higher wages, in part for unmeasured workers' abilities and in part for firm size effects.

Hierarchy and the Employer Size Effect on Wages: Evidence from Britain

“…While these results come from the USA, similar evidence exists for many countries. An unexplained establishment size effect has been found for the UK (Main and Reilly 1993;Green et al 1996;Manning 2003), Canada (Morissette 1993;Reilly 1995), Germany (Schmidt and Zimmermann 1991;Gerlach and Schmidt 1995;Andrews et al 2012), Austria (Winter-Ebmer 2001Gruetter and Lalive 2009), France (Abowd et al 1999;Fakhfakh and Fitzroy 2006), Switzerland (Winter-Ebmer and Zweimuller 1999), Italy (Brunello and Colussi 1998;Scoppa 2014), Nordic countries (Albaek et al 1998;Pehkonen et al 2017), a cross-section of five European countries (Lallemand et al 2007), a cross-section of nine OECD countries (Gibson and Stillman 2009), 1 Latin American countries (Mizala and Romaguera 1998), and developing African countries (Strobl and Thornton 2004).…”

“…2012), Austria (Winter‐Ebmer 2001; Gruetter and Lalive 2009), France (Abowd et al. 1999; Fakhfakh and Fitzroy 2006), Switzerland (Winter‐Ebmer and Zweimuller 1999), Italy (Brunello and Colussi 1998; Scoppa 2014), Nordic countries (Albaek et al. 1998; Pehkonen et al.…”

Profit Sharing and the Firm‐Size Wage Premium

“…If l > c, the firm-size wage effect becomes negative, but it is compensated by an even larger profit sharing premium. 10 Studies that use panel methods and register-based employer-employee data typically rely on samples of 1-2 per cent of all wage earners or less (see Barth and Dale-Olsen, 2011;Scoppa, 2014). Survey-based data involve smaller samples.…”

“… Studies that use panel methods and register‐based employer‐employee data typically rely on samples of 1–2 per cent of all wage earners or less (see Barth and Dale‐Olsen, ; Scoppa, ). Survey‐based data involve smaller samples.…”

Collective Bargaining and the Evolution of Wage Inequality in Italy

“…56 On this topic, it has been documented for several countries that there is a firm-size wage premium (e.g. Fox [2009] for US and Sweden and Scoppa [2014] for Italy), so that excluding firms below a given threshold could lead to an underestimation of between plants wage differentials. Moreover, Dell'Aringa, Lucifora, and Orlando [2005], studying a sample of Italian firms in 1995, show that within establishments pay dispersion is increasing with firm size.…”