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10.2202_1935-1704.1321
Journal article

Firm Size, Productivity, and Manager Wages: A Job Assignment Approach

BP2-STS

  • 2007
Published in:
  • The B.E. Journal of Theoretical Economics. - Walter de Gruyter GmbH. - 2007, vol. 7, no. 1, p. 1-39
Asymmetric equilibrium
Firm size
Job assignment
Manager wages
Productivity
English Ability of managers and other nonproduction professionals is key for the productivity of firms. Hence, the assignment of heterogeneous nonproduction workers across firms determines the distribution of productivity. In turn, the transmission of productivity differences into profit differences – resulting from product market competition – determines firms’ willingness to pay for higher managerial skills. This paper explores the equilibrium assignment of nonproduction workers across ex ante identical firms which results from this interaction between product market and the market for nonproduction skills. The analysis suggests that, typically, large and productive firms coexist with small, low-productivity firms. Consistent with empirical evidence, a skewed distribution of firm size tends to arise. Moreover, the model predicts a positive relationship of firm size to productivity, manager quality, and manager remuneration. Finally, according to comparative-static analysis, higher intensity of product market competition can account for increases in the compensation at the top of the wage distribution.
Faculty
Faculté des sciences économiques et sociales et du management
Department
Département d'économie politique
Language
  • English
Classification
Economics
License
License undefined
Open access status
green
Identifiers
Persistent URL
https://folia.unifr.ch/unifr/documents/323697
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