Premium
Determinants of the Size of the Small Business Sector: They Are Labor Productivity, Wage Rates and Capital Intensity
Author(s) -
Miller Edward M.
Publication year - 1986
Publication title -
american journal of economics and sociology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.199
H-Index - 38
eISSN - 1536-7150
pISSN - 0002-9246
DOI - 10.1111/j.1536-7150.1986.tb01930.x
Subject(s) - productivity , profit margin , wage , labour economics , capital intensity , profit (economics) , labor intensity , economics , business , production (economics) , margin (machine learning) , capital (architecture) , market economy , finance , microeconomics , history , archaeology , machine learning , computer science , macroeconomics
A bstract . Statistical analysis of a hitherto unpublished tabulation of the 1976 Annual Survey of Manufactures provides new evidence of the small business/ large business relationship in the U.S. economy. Small business (measured by employees) seems to have an advantage over large in that it has relatively lower wage costs. But the data prove it has a higher ratio of labor inputto unit output. Higher productivity in large firms make its wage/output relationship an advantage over small firms. Large firms pay appreciably higher wages than small where most production is by large firms. Highly skilled and hence higher paid workers may be a correlate of higher mechanization. Similarly, the role of capital intensity as an indicator of technology differences explains why capital productivity is no adequate explicator of firm industry share. These variables are closely related to profit margin. Relatively high book values in large firms are associated with low small business industry shares. Nor do large businesses have an advantage in lower prices for raw materials and parts. In the U.S. large business is centered in the capital intensive industries.