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Employee Participation and Wages: An Empirical Investigation with Selectivity Correction

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Author Info
Tushar Kanti Nandi ()
Abstract

This paper analyzes the relationship between employee participation in work teams, profit sharing and consultation between employees and management, and wages. It uses matched employeeestablishment data from the British economy. It takes explicit account of selectivity that arises from self-selection of employees into their preferred establishments and selective adoption of participatory practices by employers. The estimates indicate wage premium for the employees who work in establishments with participatory practices. The selectivity appears to be an important factor in the relationship between employee participation and wages. The estimates without selectivity correction suggest a lower wage premium than that suggested by selectivity corrected estimates. The selectivity corrected estimates show that employees in establishment with any one, two or all of the participatory practices earn a wage premium of 18%, 32.7% and 55.1%, respectively. The estimates of the interaction model of participation and education indicate that an extra year of education earns lower wage premium in establishments with participatory practices than in establishments with no participatory practice. This finding suggests that the equalizing effect of employee participation can reduce wage inequality between high and low educated employees

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Paper provided by Department of Economics, University of Siena in its series Department of Economics University of Siena with number 483.

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Date of creation: Jul 2006
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Handle: RePEc:usi:wpaper:483

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Related research
Keywords: Work teams; Profit sharing; Employee participation; Selectivity; Wage;

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Find related papers by JEL classification:
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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  6. Sandra E. Black & Lisa M. Lynch, 2001. "How To Compete: The Impact Of Workplace Practices And Information Technology On Productivity," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 434-445, August. [Downloadable!] (restricted)
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  7. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August. [Downloadable!] (restricted)
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  8. Reilly, Kevin T, 1996. "Does Union Membership Matter? The Effect of Establishment Union Density on the Union Wage Differential," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 547-57, August. [Downloadable!] (restricted)
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  17. Sandra E. Black & Lisa M. Lynch & Anya Krivelyova, 2003. "How workers fare when employers innovate," Working Papers in Applied Economic Theory 2003-22, Federal Reserve Bank of San Francisco. [Downloadable!]
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  18. Harminder Battu & Clive R. Belfield & Peter J. Sloane, 2003. "Human Capital Spillovers within the Workplace: Evidence for Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 575-594, December. [Downloadable!] (restricted)
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