Pay Inequality and Firm Performance: Evidence from Matched Employer-Employee Data
AbstractThis paper uses a large matched employer-employee data set for Sweden to analyse several predictions from tournament theory. For white-collar workers, a positive effect of intra-firm wage dispersion on profits and average pay is found. This result is robust to controls for human capital characteristics and firm fixed-effects as well as to instrumenting the wage dispersion variable. Using data on around 10,000 managers, the same relationships are also found for executives. Further results include a positive relationship between market demand volatility and wage dispersion for managers, and a negative effect of the number of managers (contestants) on managerial pay spread.
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Bibliographic InfoPaper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 186.
Length: 38 pages
Date of creation: 19 Dec 2002
Date of revision:
Wage dispersion; Firm performance; Tournament models; Matched employer-employee data;
Other versions of this item:
- Fredrik Heyman, 2005. "Pay inequality and firm performance: evidence from matched employer-employee data," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1313-1327.
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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