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Author: Garen, John Edward

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1.	Garen, John Edward
1.	The Effect of Firm Size on Wage Rates Ph.D. Dissertation, The Ohio State University, 1982. DAI-A 43/01, p. 229, Jul 1982. Also: http://rave.ohiolink.edu/etdc/view?acc_num=osu1269533065 Cohort(s): Young Men Publisher: UMI - University Microfilms, Bell and Howell Information and Learning Keyword(s): Control; Firm Size; I.Q.; Industrial Classification; Modeling; Skilled Workers; Wage Rates A substantial amount of empirical work in the economics literature has verified the correlation between firm size and wage rates is positive and significant, even after controlling for standard measures of worker quality. However, little theoretical work has been done to explain this regularity. In addition, the empirical analysis presented here rejects a number of simple explanations for the firm size effect on wages, including the union threat model. A model of wage rate determination is developed which yields implications about wage structure in large and small firms. The model focuses on the desire of firms to evaluate the abilities of their workers. It is assumed that self-selection devices do not sort workers perfectly, thus a substantial variation in ability remains for a given set of observable characteristics. The firm can insure the retention of its highest ability workers, as well as those of lower ability, by paying everyone the opportunity wage of the most able. Alternatively, it can save on its wage bill by attempting to evaluate workers' abilities and paying each his opportunity wage. It is shown that the wage required to maintain the quality of the firm's labor force is smaller, the more accurate the firm's evaluation is. Due to hierarchical 'loss of control,' large firms encounter higher costs of evaluating workers, thus rely more on paying wage premiums. The model is consistent with the observed correlation between firm size and wages, but it also is supported by other evidence. It is shown that larger firms' less accurate evaluations lead to a smaller return to measured ability for workers in large firms. Results using the National Longitudinal Survey of Young Men indicate this is the case, where IQ is used as a measure of ability. Furthermore, wage dispersion should be smaller among workers in large firms because large firms, having inaccurate evaluations, cannot differentiate well among workers. Again, the data support this. The model is a lso consistent with findings regarding the educational attainment and productivity of workers in large firms. Thus, the model is well supported by the data.
	Bibliography Citation Garen, John Edward. The Effect of Firm Size on Wage Rates. Ph.D. Dissertation, The Ohio State University, 1982. DAI-A 43/01, p. 229, Jul 1982..

2.	Garen, John Edward
2.	The Trade-Off Between Wages and Wage Growth Journal of Human Resources 20,4 (Fall 1985): 522-539. Also: http://www.jstor.org/stable/145682 Cohort(s): Young Men Publisher: University of Wisconsin Press Keyword(s): Earnings; Educational Returns; Wage Growth This paper tests the theory of compensating differentials by estimating the sacrifice in current earnings necessary to acquire employment leading to future wage growth. Utilizing longitudinal data from the Young Men cohort, the predicted value of each individual's actual wage growth subsequent to the current period is related to the current wage. The results indicate a strong, inverse relationship between current earnings and the amount of future wage growth "purchased." The magnitude of this trade-off between current and future earnings varies with schooling, as does the total amount of current earnings capacity invested in wage growth. These findings are then compared to related results in the human capital production function literature.
	Bibliography Citation Garen, John Edward. "The Trade-Off Between Wages and Wage Growth." Journal of Human Resources 20,4 (Fall 1985): 522-539.

3.	Garen, John Edward
3.	Worker Heterogeneity, Job Screening, and Firm Size Journal of Political Economy 93,4 (August 1985): 715-739. Also: http://www.jstor.org/stable/1832134 Cohort(s): Older Men, Young Men Publisher: University of Chicago Press Keyword(s): Assets; Cost-Benefit Studies; Firm Size; Heterogeneity; Schooling; Wages A model of job screening is constructed in which firms make wage offers to workers on the basis of an imperfect evaluation of their abilities. If large firms have higher costs associated with acquiring information about workers, they screen workers with less accuracy and choose a wage compensation scheme different from the one small firms choose. This produces the often observed positive correlation between firm size and wages. The model also predicts that wage structure, and possibly wage dispersion, will vary by firm size and that individuals who acquire more schooling will opt to work in a large firm. These hypotheses are tested using disaggregate data on individual workers from the 1969 NLS panels of Young and Older Men. The empirical results are quite supportive of the model. Thus, the cost of acquiring information about personnel rises with firm size, and large firms face numerous information problems that small firms do not.
	Bibliography Citation Garen, John Edward. "Worker Heterogeneity, Job Screening, and Firm Size." Journal of Political Economy 93,4 (August 1985): 715-739.

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