Econometrica: Sep 1973, Volume 41, Issue 5
The Elasticity of Labor Supply to the Individual Firm
Phillip NelsonThe purposes of this paper are to establish propositions about the behavior of the supply curve of labor to the individual firm and to estimate the distribution of the elasticities of this supply curve by firm. The main statistical problem faced is the possibility that labor quality increases with firm size so that one does not know how to interpret the relationship of firm size and measured wages. My solution to that problem is to look at the relationship of wages to firm size relative to population density, since I expect the "quality" and the labor supply effects to differ markedly in this respect.
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