Pay, Employment, and Dynamics of Young Firms

Babina, Tania; Ma, Wenting; Moser, Christian; Ouimet, Paige; Zarutskie, Rebecca

doi:10.2139/ssrn.3425596

Cited by 4 publications

(3 citation statements)

References 43 publications

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“…Conversely, Adrjan (2018) finds that young firms pay a small premium for new hires. This positive young-firm wage premium is more recently supported by Babina et al (2019), who show a positive and significant young-firm pay premium for the United States that only appears when one controls for the necessary worker (sorting) and firm fixed effects (employer heterogeneity) (Abowd et al, 1999).…”

Section: Innovation Wage Premiummentioning

confidence: 87%

Do Innovative Firms Pay Higher Wages?: Micro-Level Evidence from Brazil

Cirera¹,

Neto²

2020

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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Section: Innovation Wage Premiummentioning

confidence: 87%

Do Innovative Firms Pay Higher Wages?: Micro-Level Evidence from Brazil

Cirera¹,

Neto²

2020

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“…We suspect that many would. Research on the short-term earnings effects of joining startups has notably found quite consistent effects, and even effect sizes, across Denmark, Germany, Sweden, and the United States (Schmieder 2013, Nystrom and Elvung 2014, Burton et al 2018, Babina et al 2019).…”

Section: Discussionmentioning

confidence: 99%

Do Startup Employees Earn More in the Long Run?

Sorenson

Dahl

Canales

et al. 2021

Organization Science

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Evaluating the attractiveness of startup employment requires an understanding of both what startups pay and the implications of these jobs for earnings trajectories. Analyzing Danish registry data, we find that employees hired by startups earn roughly 17% less over the next 10 years than those hired by large, established firms. About half of this earnings differential stems from sorting—from the fact that startup employees have less human capital. Long-term earnings also vary depending on when individuals are hired. Although the earliest employees of startups suffer an earnings penalty, those hired by already-successful startups earn a small premium. Two factors appear to account for the earnings penalties for the early employees: Startups fail at high rates, creating costly spells of unemployment for their (former) employees. Job-mobility patterns also diverge: After being employed by a small startup, individuals rarely return to the large employers that pay more.

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“…However, it can also have effects beyond the earnings distribution, serving as a tool to curtail firms' labor market power and reallocating labor from low-pay to high-pay firms (Dustmann et al, 2021). Nevertheless, it is also the case that, on average, young firms pay lower wages (Babina et al, 2019;Brown and Medoff, 2003;Michelacci and Quadrini, 2009;Dinlersoz et al, 2019) and are therefore more susceptible to increases in the minimum wage policy. Since they also account for the bulk of net job creation and invest relatively more than their older counterparts (Decker et al, 2014), a minimum wage might reallocate jobs away from the most dynamic firms of the economy.…”

Section: Introductionmentioning

confidence: 99%

Minimum Wage, Business Dynamism, and the Life Cycle of Firms

Luduvice,

Martinez,

Sollaci

2024

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This paper studies the effects of the minimum wage on the life cycle of firms. We first build a tractable model where heterogeneous firms have labor market power, invest in innovation, and choose formal or informal sectors. The model predicts that a minimum wage hike not only shrinks young and low-productivity firms but also lowers incentives to innovate, resulting in lower life cycle growth. We then test the predictions of the model using Brazilian administrative and census data leveraging the variation in exposure across establishments and municipalities to the large increase in the minimum wage between 1999 and 2010. At the establishment level, an increase in the minimum wage: i) decreases the growth rates of small and young establishments and ii) increases the growth rates of old and large establishments. When analyzing exposed municipalities, we observe an increase in the earnings of workers in both the formal and informal sectors, as well as informal employment. Our findings suggest that the minimum wage is a possible explanation for the decline in the importance of young establishments and business dynamism in Brazil.

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Pay, Employment, and Dynamics of Young Firms

Cited by 4 publications

References 43 publications

Do Innovative Firms Pay Higher Wages?: Micro-Level Evidence from Brazil

Do Innovative Firms Pay Higher Wages?: Micro-Level Evidence from Brazil

Do Startup Employees Earn More in the Long Run?

Minimum Wage, Business Dynamism, and the Life Cycle of Firms

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