A positive wage-firm size relationship is well documented in the empirical
literature in industrial organization and labor economics. Firm size seems to
proxy various unobserved determinants such as job satisfaction, monitoring
costs, more complex technologies and worker participation in monopoly profits.
It is generally argued that, the greater the possibility of controlling for
these latent factors, the less likely that a significant size effect will
appear. This paper attempts to distinguish firm size from other wage
determinants for a rich data source for West Germany and demonstrates the
persistence of the size premium.