Is there a firm size-wage gap after economic transition? – An examination of for-profit and not-for-profit firms in Estonia

The labor economics and industrial organization literature is replete with studies showing a positive relationship between firm size and employees’ wages. However, no work to date has examined, particularly with regard to the inverse probability weighting approach taken in this study, whether this effect is present in a post‐communist country shortly after economic transition. This study fills that void by testing for a firm size‐wage effect in Estonia after it declared independence from the Soviet Union. In doing so, we employ a large micro‐dataset from the Estonian Labor Force Survey and find that, holding several job, industry, and city characteristics constant, a statistically significant firm size‐wage gap exists across workers employed by all types of firms, and separately for those employed across both for‐profit and not‐for‐profit firms in Estonia after its economic transition.