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Title: Worker Heterogeneity, Job Screening, and Firm Size
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Garen, John Edward |
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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. |
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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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