@TechReport{iza:izadps:dp1778, author={Lallemand, Thierry and Rycx, François}, title={Establishment Size and the Dispersion of Wages: Evidence from European Countries}, year={2005}, month={Sep}, institution={Institute of Labor Economics (IZA)}, address={Bonn}, type={IZA Discussion Paper}, number={1778}, url={https://www.iza.org/publications/dp1778}, abstract={We investigate how the wage distribution differs among small and large establishments in four European countries. Findings show that within-establishment wage dispersion rises with size because large employers have a more diverse workforce. They also suggest that screening and monitoring costs imply a lower sensitivity of wages to ability in larger establishments. Smaller establishments are found to rely more on incentive-based pay mechanisms, particularly in countries with a low trade union coverage rate. Further results indicate that between-establishment wage dispersion decreases with employer size because smaller establishments are technologically more diversified and hence exhibit greater diversity in average workforce skills.}, keywords={decomposition of wages;establishment size;wage structure;Europe}, }