Firm Size or Firm Age? The Effect on Wages Using Matched Employer-Employee Data

This paper uses matched employer-employee data set for Sweden to study the relationship between firm age and wages, systematically addressing a variety of possible explanations for observing a firm age-wage effect. Results show considerable heterogeneity across years, along segments of the firm age distribution and across industries. For 1995, a positive relationship is found between firm age and wages. This relationship is robust to inclusion of variables that might affect results. Taking into account that larger firms are also older firms, results show that inclusion of firm age does not alter the positive effect of firm size on wages.