Search Results

Author: Gordanier, John Marc
Resulting in 1 citation.
1. Gordanier, John Marc
Effects of Firm Structure on Wages and Careers
Ph.D. Dissertation, The University of Wisconsin - Madison, 2006. DAI-A 67/12, Jun 2007.
Cohort(s): NLSY79
Publisher: ProQuest Dissertations & Theses (PQDT)
Keyword(s): Career Patterns; Firm Size; Heterogeneity; Human Capital; Labor Economics; Occupational Choice; Self-Reporting; Wages

Permission to reprint the abstract has not been received from the publisher.

This dissertation consists of three essays concerning self-selection, learning, and incentives arising from the structure of the firm.

The first chapter investigates the relationship between wages and the size of previous employers. Despite the plethora of papers examining the firm-size wage premium, there is little attention to potential long-term effects of firm size on wages. This paper documents a positive association between current wages and previous firm size, using data from the National Longitudinal Survey of Youth. The magnitude of this relationship is larger among workers that are more able. These workers are also substantially more likely to be working in large firms. I develop a dynamic model where workers choose the size of their employer to maximize career earnings. Large firms offer the opportunity to specialize, which increases the rate of learning. The model induces self-selection based on human capital into large firms and higher career wages for those that start in large firms.

The second essay develops a framework where some firms employ up-or-out rules, while others do not. Up-or-out rules are optimal for firms when they must screen new associates to find partners and have an incentive to maintain partnership quality. I show that when workers have heterogeneous effort costs, the higher effort cost workers will self-select into firms that do not use up-or-out rules. A costly investment, in the form of effort as an associate, is required to reveal productivity as a partner. Workers with high effort costs do not find the investment worthwhile, thus, they will not make partner and select firms where they can retain their firm-specific human capital.

The final essay looks at the incentive effects associated with up-or-out rules. I describe a model with heterogeneous abilities among associates. Firms observe a noisy signal of output based on associate ability and effort. Using permanent associates as well as partnership, the firm is able to induce the optimal effort from all types; up-or-out rules alone cannot accomplish this. Use of a consolation prize requires the firm to increase the rewards of partnership, to prevent high ability workers from pooling with lower ability workers.

Bibliography Citation
Gordanier, John Marc. Effects of Firm Structure on Wages and Careers. Ph.D. Dissertation, The University of Wisconsin - Madison, 2006. DAI-A 67/12, Jun 2007..