Linking Firm Structure and Skill Premium

Economics

Speaker:David Perez-Reyna, Universidad de Los Andes
Date: Monday 26 September 2016
Time: 13.00 - 14.30
Location: Streatham Court C

Further details

We propose an original model of firm hierarchy which suggests that firm structure is important for understanding the wage structure. In our model, more productive firms choose to employ more levels of management, which requires a higher average level of skill in workers and consequently a higher average skill premium. This is consistent with what we document in the Chilean data and also agrees with the firm size to skill premium relationship commonly documented in the literature. Additionally, our model predicts that skill premium is increasing in the ratio of workers to managers, a fact we also observe in the Chilean data.