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Intra-Firm Wage Dispersion and Firm Performance

  • Winter-Ebmer, Rudolf
  • Zweimuller, Josef

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. Copyright 1999 by WWZ and Helbing & Lichtenhahn Verlag AG

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Article provided by Wiley Blackwell in its journal Kyklos.

Volume (Year): 52 (1999)
Issue (Month): 4 ()
Pages: 555-72

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Handle: RePEc:bla:kyklos:v:52:y:1999:i:4:p:555-72
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  1. Richard B. Freeman, 1982. "Union wage practices and wage dispersion within establishments," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(1), pages 3-21, October.
  2. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
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  6. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  7. Winter-Ebmer, Rudolf & Zweimuller, Josef, 1996. "Immigration and the Earnings of Young Native Workers," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 473-91, July.
  8. Josef Zweimuller & Rudolf Winter-Ebmer, 1999. "Firm-Size Wage Differentials in Switzerland: Evidence from Job-Changers," American Economic Review, American Economic Association, vol. 89(2), pages 89-93, May.
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  12. Paul R. Milgrom., 1987. "Employment Contracts, Influence Activities and Efficient Organization Design," Economics Working Papers 8741, University of California at Berkeley.
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  17. Agell, Jonas & Lundborg, Per, 1995. " Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 295-307, June.
  18. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  19. Jonathan S. Leonard, 1990. "Executive pay and firm performance," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 13-29, February.
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