Entrepreneurial Skills and Workers' Wages in Small Firms

This paper contributes to the understanding of how small firms are organized and managed. We develop and test a simple empirical entrepreneur-worker matching model in small firms where individual skills play a central role. The model contemplates the existence of complementarities between workers' and entrepreneur's skills. The empirical analysis provides results consistent with the matching model: entrepreneurs are more skilled than workers and more skilled entrepreneurs manage larger firms; more skilled entrepreneurs hire more skilled workers. The estimation of wage regressions shows that the higher the level of education and experience of the entrepreneur, the higher the wage premium for workers