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Type: Journal article
Title: Directed search and firm size
Author: Tan, Serene Sze-Ching
Citation: International Economic Review, 2012; 53(1):95-113
Publisher: Univ Penn
Issue Date: 2012
ISSN: 0020-6598
School/Discipline: School of Economics
Statement of
Serene Tan
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
RMID: 0020117078
DOI: 10.1111/j.1468-2354.2011.00672.x
Appears in Collections:Economics publications

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