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    Human capital and the size distribution of firms

    Gomes, Pedro and Kuehn, Z. (2017) Human capital and the size distribution of firms. Review of Economic Dynamics 26 , pp. 164-179. ISSN 1094-2025.

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    Countries with a lower fraction of workers with secondary education have smaller firms. We set up a model of occupational choice where individuals have primary, secondary or tertiary education. A more educated work force raises firm size and productivity. More educated workers earn higher wages, and hence among educated individuals only the more able become entrepreneurs. We find that within the framework of our model, different educational attainments can explain one third of the difference in average firm size between the US and Mexico. While improved educational attainments hence imply an increase in firm size over time, a fall in the price of capital together with capital-skill complementarity acts in the opposite direction, something that can explain a relatively constant average firm size in the US since the late 1970's. Our policy experiments highlight how public employment and the skill bias in public hiring additionally affect firm size and productivity.


    Item Type: Article
    Keyword(s) / Subject(s): firm size, educational attainment, entrepreneurship, college premium, high school premium, public employment.
    School: School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Pedro Gomes
    Date Deposited: 12 Oct 2017 09:36
    Last Modified: 10 Jun 2021 09:34


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