Unobserved Heterogeneity and the Relation between Earnings and Firm Size: Evidence from Two Developing Countries
نویسندگان
چکیده
It has been argued that the most likely explanation for the result that earnings rise with firm size is that large firms employ high-ability individuals. In this paper we use matched employer-employee panel data from Ghana and Kenya and test for firm size effects in earnings regressions whilst controlling for unobserved ability in the form of worker fixed effects. For both countries we obtain a size effect that is both economically and statistically significant. JEL classification: J3, L25.
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