Effort Level by Firm Size in a Developing Country

Abstract

This paper compares effort levels of workers from small and medium/large firms. Generally, smaller firms pay lower wages, have higher turnover rate and offer less employment protection, aspects that can influence work effort. Therefore, through a data panel on the Brazilian labor market from 2005 to 2015, different econometric models (RE probit model and Mundlak–Chamberlain model) and using two proxies (sub-remuneration and absence) for measurement, we analyzed whether workers of small firms demonstrate higher working effort than workers of medium/large firms and whether such differences remained after job switch among firms. Results indicate that: (1) workers of small firms are more dedicated to work; (2) workers who switched jobs from a small to a medium/large firm experienced change in behavior, for variable sub-remuneration; (3) switching jobs did not alter working effort for variable absence, as workers remained on a superior level to those employed in small/large firms throughout the research.