Firm age and wage determination: evidence from matched employer–employee data in Japan

ABSTRACT

Firm age, a new factor underlying wage differentials, has been analysed in the emerging literature using matched employer–employee data, though its effect on wages remains inconclusive. This study adds to the literature by providing insights into different wage determinants between industries. We find firm age has a negative effect on wages and a positive effect on a slope of the wage–tenure profile, particularly in non-manufacturing industries. The industrial difference may be explained by the difference in firms’ survival rates and expectations on long-term training.

KEYWORDS:

• Wage differentials
• wage profile
• firm age
• matched employer–employee data

JEL CLASSIFICATION:

• J41
• J31

Acknowledgements

This study is conducted as part of the project, 'An Empirical Analysis and Establishment of Center of Education on Official Statistics', at the Kobe University Center for Social Systems Innovation. Yugami obtained permission to use national questionnaire information under the provisions of Article 33 of the Statistics Act. We express our heartfelt gratitude to all those who were instrumental in helping us use the data, particularly, Mika Konno and Keiko Harada of the Ministry of Health, Labour and Welfare, who provided valuable information for matching the data. We are also grateful for helpful comments and suggestions by the participants of the 4th Hanyang-Kobe-Nanyang Joint Symposium in Economics and Tokyo Labor Workshop.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

The study was supported by the Japan Society for the Promotion of Science under grant number [21330057].