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Wage inequality and firm performance: Professional basketball's natural experiment

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  • David Berri
  • R. Jewell

Abstract

The purpose of this inquiry is to utilize a natural experiment from professional basketball to examine how wage inequality impacts the productivity of the firm. The literature suggests that wage inequality may promote firm productivity if higher wages are necessary to limit the damage potential of certain workers. In contrast, other writers have trumpeted the productivity gains from worker cooperation and thus, argued that wage disparity lowers firm output. During the 1990s, the National Basketball Association experienced dramatic increases in the level of wage inequality. The empirical evidence reported here supports a third possibility. Specifically, wage inequality and firm productivity are not related. Copyright International Atlantic Economic Society 2004

Suggested Citation

  • David Berri & R. Jewell, 2004. "Wage inequality and firm performance: Professional basketball's natural experiment," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 32(2), pages 130-139, June.
    • Handle: RePEc:kap:atlecj:v:32:y:2004:i:2:p:130-139
    DOI: 10.1007/BF02298830
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    References listed on IDEAS

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