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Abstract
Economists have long puzzled over the fact that large firms pay higher wages than small
firms, even after controlling for worker's observed productive characteristics. One possible
explanation has been that firm size is correlated with unobserved productive attributes which
confound firm size with other productive characteristics. This study investigates the size-wage
premium in the context of firms competing within a single market for a relatively
homogeneous product: hogs. We pay particular attention to the matching process by which
workers are linked to farms of different size and technology use, and whether the matching
process may explain differences in wages across farms. The study relies on four surveys of
employees on hog farms collected in 1990, 1995, 2000, and 2005. We find that there are
large wage premia paid to workers on larger farms that persist over time. Although more
educated and experienced workers are more likely to work on larger and more
technologically advanced hog farms, the positive relationships between wages and both farm
size and technology adoption remain large and statistically significant even after controlling
for differences in observable worker attributes and in the observed sorting process of workers
across farms.