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Do Start-Ups Pay Less?

Author
Burton, M. Diane; Dahl, Michael S.; Sorenson, Olav
Abstract
The authors analyze Danish registry data from 1991 to 2006 to determine how firm age and firm size influence wages. Unadjusted statistics suggest that smaller firms paid less than larger firms paid, and that firm age had little or no bearing on wages. After adjusting for differences in the characteristics of employees hired by these firms, however, they observe both firm age and firm size effects. Larger firms paid more than did smaller firms for observationally equivalent individuals but, contrary to conventional wisdom, younger firms paid more than older firms. The size effect, however, dominates the age effect. Thus, although the typical start-up — being both young and small — paid less than a more established employer, the largest start-ups paid a wage premium.
Date Issued
2018-10-01Subject
wages; human capital; tenure and wages; wage level; wage structure
Rights
Required Publisher Statement: © Cornell University. Reprinted with permission. All rights reserved.
Type
article