Institute Insights: Pay, Employment and Dynamics of Young Firms
Prevailing data suggests that young firms pay employees less than their more mature counterparts. But does a closer look at the data tell a different story? When UNC Kenan-Flagler researcher Paige Ouimet and colleagues exploited the two-sided panel nature of confidential microdata from the U.S. Census Bureau to control for relevant dimensions of worker and firm heterogeneity, they uncovered a positive and significant young-firm pay premium. They also found that worker selection at firm birth is related to future firm dynamics, including survival and growth.