Human Capital and the Size Distribution of Firms

Arbeitspapier

Countries that have relatively fewer workers with a secondary education have smaller firms. The shortage of skilled workers limits the growth of more productive firms. Two factors influence the availability of skilled workers: i) the education level of the workforce and ii) large public sectors that predominantly hire individuals with a better education. We set up a model economy with a government and private firm formation where production requires unskilled and skilled jobs. Workers with a secondary education are pivotal as they can perform both types of jobs. We find that level of education and public sector employment account for 40-45% of the differences between the United States and Mexico in terms of average firm size, GDP per capita, and GDP per hour worked. We also show that the impact of public employment on skill premiums and productivity measures depends on the skill bias in public hiring.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 8268

Classification and Topics

• Classification: Wirtschaft ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Public Sector Labor Markets ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Fiscal Policies and Behavior of Economic Agents: General ; Macroeconomic Analyses of Economic Development
• Subject: firm size ; educational attainment ; skill complementarities ; public employment ; college premium ; high school premium

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gomes, Pedro Maia ; Kuehn, Zoë
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/98944
• Last update: 10.03.2025, 11:44 AM CET