Working Paper: CEPR ID: DP17469
Authors: Lin Shao; Faisal Sohail; Emircan Yurdagul
Abstract: Larger firms exhibit i) longer hours worked, ii) higher wages, and iii) smaller (larger) wage penalties for working long (short) hours. We reconcile these patterns in a general equilibrium model, which features the endogenous interaction of hours, wages, and firm size. In the model, workers willing to work longer hours sort into larger firms that offer a wage premium. Complementarities in hours generate wage penalties that increase with the distance from average firm hours. We use the model to argue the importance of the interaction between hours, wages, and firm size for inequality and firm policy.
Keywords: Labor Supply; Hours Worked; Firm Size; Sorting; Complementarities
JEL Codes: E23; J22; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Larger firms impose smaller penalties for long hours (J38) | Wage penalties (J31) |
| Larger firms impose larger penalties for short hours (J38) | Wage penalties (J31) |
| Productivity declines as workers deviate from usual hours worked (J22) | Wage penalties (J31) |
| Larger firms (L25) | Average hours worked (J22) |
| Larger firms exhibit longer average hours worked (J29) | Wages (J31) |
| Average hourly wages increase with firm size (J31) | Wages (J31) |
| Larger firms attract higher-skilled workers (J29) | Wages (J31) |