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Wage Structure and Firm Productivity in Belgium

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Author Info
Thierry Lallemand
Robert Plasman
Francois Rycx

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Abstract

The objective of this paper is twofold. First, we analyse the structure of wages within and between Belgian firms. Next, we examine how the productivity of these firms is influenced by their internal wage dispersion. To do so, we use a large matched employer-employee data set (i.e., a combination of the 1995 'Structure of Earnings' and 'Structure of Business' Surveys). On the basis of the methodology developed by Winter-Ebmer and Zweimuller (1999), we find that within-firm wage dispersion has a positive and significant effect on firm productivity. This result is robust to controls for individual and firm characteristics as well as to instrumenting the wage inequality variable. Findings also suggest that the intensity of this effect is stronger within firms with: i) a majority of blue-collar workers, and ii) a high degree of monitoring. These results are more in line with the 'tournament' models than with the 'fairness, morale and cohesiveness' models.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12978.

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Date of creation: Mar 2007
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Handle: RePEc:nbr:nberwo:12978

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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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  8. Pedro S. Martins, 2008. "Dispersion in Wage Premiums and Firm Performance," Working Papers 8, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research. [Downloadable!]
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  11. Bernd Görzig & Martin Gornig & Axel Werwatz, 2006. "Firm Specific Wage Spread in Germany - Decomposition of regional differences in inter firm wage dispersion," SFB 649 Discussion Papers SFB649DP2006-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
  12. Olga Bourachnikova, 2007. "Weighting Function in the Behavioral Portfolio Theory," Working Papers DULBEA 07-07.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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  15. Benoît Mahy & François Rycx & Mélanie Volral, 2008. "L’influence de la dispersion salariale sur la performance des grandes entreprises belges," Working Papers DULBEA 08-13.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
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