Corporate tournaments, human capital acquisition, and the firm size - Wage relation

Ján Zábojník, Dan Bernhardt

Research output: Contribution to journalArticle

Abstract

This paper provides a possible explanation for the empirically observed size-wage effect and inter-industry wage differences. It develops a model in which incentives for workers to accumulate general human capital are provided by corporate tournaments, where workers with the highest level of general human capital win promotions. Given that the prizes in such tournaments are determined by outside market conditions, the investment and the equilibrium wages depend on firm and industry characteristics. The model implies that workers in bigger firms and in more technology intensive and profitable firms and industries acquire more human capital and receive higher wages and benefits.

Original languageEnglish (US)
Pages (from-to)693-716
Number of pages24
JournalReview of Economic Studies
Volume68
Issue number3
DOIs
StatePublished - Jan 1 2001

ASJC Scopus subject areas

  • Economics and Econometrics

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