Firm size and human capital as determinants of productivity and earnings

Firm size and human capital as determinants of productivity and earnings

Published Jan 2001

Authors

M. Söderbom, F. Teal

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How important is human capital in explaining distribution of earnings and productivity across firms of differing size?

This paper investigates the roles of size and human capital in determining both earnings and productivity using a panel data set of matched labour firm data which allows us to control for such factors.

Paper argues that neither the unobservable quality of labour, nor the unobservable characteristics of the workplace, is the source of the relationship between firm size and earnings, and that this effect can have a rent-sharing interpretation. For the data human capital is of minor importance in explaining either the distribution of earnings or productivity across firms of differing size.

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