Corporate tournaments, human capital acquisition, and the firm size-wage relation

This paper provides a possible explanation for the empirically observed siz e-wage effect and inter-industry wage differences. It develops a model in w hich incentives for workers to accumulate general human capital are provide d by corporate tournaments, where workers with the highest level of general human capital win promotions. Given that the prizes in such tournaments ar e determined by outside market conditions, the investment and the equilibri um wages depend on firm and industry characteristics. The model implies tha t workers in bigger firms and in more technology intensive and profitable f irms and industries acquire more human capital and receive higher wages and benefits.