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Premiums to employment in larger establishments: evidence from Peru

Year: 1998

Type: article

Abstract: Examination of the employer size–wage effect for males in urban Peru suggests the following. Higher wages in larger establishments do not merely compensate for higher worker quality or inferior working conditions. Size differences in the use of rising wage–tenure profiles cannot provide a market-clearing explanation for the employer size–wage effect unless workers are extremely impatient. Thus, larger employers appear to pay premiums. Unionization explains none of the premiums, and minimum wage compliance explains at best a small fraction. Shirking-based efficiency wage explanations for premiums are implausible because Peruvian job security legislation greatly inhibits dismissals in larger establishments. Explanations meriting further research involve the use of high wages to reduce turnover and to improve productivity-enhancing morale.

Source: Journal of Development Economics

DOI: 10.1016/s0304-3878(98)00038-8

Author: Julie Anderson Schaffner

Institution: Stanford University

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $4,590