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|Title:||Directed search and firm size|
|Author:||Tan, Serene Sze-Ching|
|Citation:||International Economic Review, 2012; 53(1):95-113|
|School/Discipline:||School of Economics|
|Abstract:||Standard directed search models predict that larger firms pay lower wages than smaller firms, contrary to the data. This article proposes one way to obtain this positive size–wage differential in a directed search setting. I posit that there is an optimal size associated with a firm: A firm suffers a penalty by not operating at its optimal size. I show that if this penalty is sufficiently large the size–wage differential will be obtained. My model also gives a new way to look at the data because it highlights the importance of the distinction between intended and realized firm sizes.|
|Rights:||© (2012) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association|
|Appears in Collections:||Economics publications|
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