Why Do Large Firms Pay Higher Wages? Evidence from Matched Worker-Firm Data,”

Abstract This study analyses the magnitude and sources of the firm-size wage premium in the Belgian private sector using a unique matched worker-firm data set. Results show the existence of a significant and positive firm-size wage premium, even when controlling for many individual characteristics and working conditions. A substantial part of this wage premium derives from the sectoral affiliation of the firms. It is also partly due to the higher productivity and stability of the workforce in large firms. Yet, findings do not support the hypothesis that large firms match high skilled workers together. Finally, results indicate that the elasticity between wages and firm size is significantly larger for white-collar workers and comparable in the manufacturing and the service sectors