a column by Giuseppe Berlingieri, Sara Calligaris and Chiara Criscuolo for VIX: CEPR’s Policy Portal
The evidence that bigger firms pay higher wages and have higher productivity is mainly based on manufacturing, which nowadays accounts for a small share of the economy.
Drawing on a unique micro-aggregated dataset, this column reveals that while the size premia for both wages and productivity are significantly weaker in market services than in manufacturing, the link between wages and productivity is stronger – the most productive firms at the top are not necessarily the largest ones in terms of employment, but they do pay the best.
This increases the likelihood of productivity and wage gains being shared with fewer workers, a further challenge to achieving inclusive growth in the new service economy.
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