Big ̄sh in small pond or small ̄sh in big pond? Money and status in the labor market

The statement that individuals care for status and for their position within a hierarchy has been subject to sparse economic analysis. I check this assertion by analyzing wages and status in the labor market. The following questions are addressed: Are individuals willing to pay for status in the labor market? Is a high position in a large ̄rm more valued than a similarly high position in a small ̄rm? Three alternative concepts of hierarchy will be used: the prestige of an occupation, based on popular evaluation of its standing; the socioeconomic index of the occupation, based on the characteristics of its workers; the ranking of the worker in the wage distribution inside the ̄rm. The size of the pond is de ̄ned as the diversity (of hierarchical positions) inside the ̄rm or its number of workers. A remarkable longitudinal linked employer-employee dataset is used. I ̄nd empirical support to the idea that workers care for status as a concept widely understood and shared by a society, such as the occupational prestige of an occupation, and they are willing to pay for such prestige in groups with high diversity or inequality in prestige. However, the evidence does not lend support to Frank's (1984, 1985) strict version of search for status, as no trade-o® between wage and rank inside a ̄rm was detected.