M. Diane Burton, Michael S. Dahl, and Olav Sorenson
We analyzed Danish registry data from 1991 to 2006 to determine how firm age and size influence wages. Unadjusted statistics suggest that smaller firms paid less than larger ones and that firm age had little or no bearing on wages. After adjusting for differences in the characteristics of employees hired by these firms, however, we observed both firm age and firm size effects. We found that larger firms paid more than smaller firms for observationally-equivalent individuals but, contrary to conventional wisdom, that younger firms paid more than older firms. The size effect, however, dominates the age effect. Thus, while the typical startup – being both young and small – paid less than a more established employer, the largest ones paid a wage premium.