Who Gets Good Jobs? The Hiring Decisions and Compensation Structures of Large Firms

Abstract

This paper demonstrates that large firms prefer to hire younger workers, which is implied by the firm-specific human capital investment theory. A simple model consistent with the implication is proposed to study large firms' hiring decisions and compensation structures. The main predictions of the model, which are broadly supported by the data, are: (1) the starting wage - hiring age profiles are flatter in large firms than in small firms; (2) the wage-tenure profiles are steeper in large firms than in small firms. Implications along the dimensions other than firm size are also tested.

JEL Classification: J31, J41