SMU SOE Seminar Series (March 16, 2026): Scale and Skill

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ABSTRACT

Using a unique dataset covering all US firms, we investigate a specific type of nonhomotheticities in production that links a firm's skill intensity to its scale. We document the presence of these non-homotheticities in all two-digit sectors. In 14 out of 19 sectors, skill intensity increases with the firm scale, while in 4 sectors larger scale reduces skill intensity. To assess the relevance of non-homotheticities in production, we study how scale has contributed to the evolution of skill intensity between 2000 and 2018. Scale is about as important as skill-biased technological change (SBTC) in explaining the average increase in skill across firms. However, scale plays a much more relevant role in shaping the differential evolution in skill intensity between firms at the top and bottom quartiles of the firm growth distribution.