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Intra-firm Wage Dispersion and Firm Performance

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Author Info
Rudolf Winter-Ebmer
Josef Zweimueller

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Abstract

Personnel economics has put forward conflicting arguments concerning the impact of increased wage dispersion within a firm on the productivity of its workers. Besides giving more incentives, bigger wage differentials might also give rise to less co-operation and more politicking amongst workers resulting in worse outcomes. We try to shed light on these issues using panel data for Austrian firms. As indicators for firm performance we use standardised wages. For white-collar wages the following picture emerges: more dispersion leads to higher earnings up to some point where the relation changes its direction. For blue-collar wages we find a positive association between dispersion and standardised wages between firms, but no relation within firms over time.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp008.

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Handle: RePEc:zur:iewwpx:008

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Related research
Keywords: wage dispersion; incentives; firm productivity;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Steve Bradley & Alina Petrescu & Rob Simmons, 2004. "The impacts of human resource management practices and pay inequality on workers' job satisfaction," Working Papers 000276, Lancaster University Management School, Economics Department. [Downloadable!]
  2. Nils Braakmann, 2008. "Intra-firm wage inequality and firm performance – First evidence from German linked employer-employee-data," Working Paper Series in Economics 77, University of Lüneburg, Institute of Economics. [Downloadable!]
  3. 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!]
    Other versions:
  4. Fredrik Heyman, 2005. "Pay inequality and firm performance: evidence from matched employer--employee data," Applied Economics, Taylor and Francis Journals, vol. 37(11), pages 1313-1327, June. [Downloadable!] (restricted)
    Other versions:
  5. S. Iranzo & Fabiano Schivardi & E. Tosetti, 2006. "Skill dispersion and firm productivity: an analysis with employer-employee matched data," Working Paper CRENoS 200617, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
    Other versions:
  6. Christian Grund & Niels Westergaard-Nielsen, 2005. "The Dispersion of Employees' Wage Increases and Firm Performance," Bonn Econ Discussion Papers bgse3_2005, University of Bonn, Germany. [Downloadable!]
    Other versions:
  7. Bingley, Paul & Eriksson, Tor, 2001. "Pay Spread and Skewness, Employee Effort and Firm Productivity," Working Papers 01-2, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
    Other versions:
  8. Luiz A. Esteves & Pedro S. Martins, 2008. "Is firm performance driven by fairness or tournaments? Evidence from Brazilian matched data," Working Papers 16, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research. [Downloadable!]
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This page was last updated on 2009-12-3.

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