Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314552 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17655
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper investigates how worker beliefs and job prospects impact the wages and growth of young firms, as well as the aggregate economy. Building a heterogeneous-firm directed search model where workers gradually learn about firm types, I find that learning generates endogenous wage differentials for young firms. High-performing young firms must pay higher wages than equally high-performing old firms, while low-performing young firms offer lower wages than equally low-performing old firms. Reduced uncertainty or labor market frictions lower the wage differentials, thereby enhancing young firm dynamics and aggregate productivity. The results are consistent with U.S. administrative employee-employer matched data.
Subjects: 
Wage Differentials
Firm Dynamics
Learning
Search Frictions
Uncertainty
JEL: 
E20
E24
J31
J41
J64
L25
L26
M13
M52
M55
Document Type: 
Working Paper

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