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Can improving the business environment narrow the within-firm pay gap? Evidence from data on 233 Chinese cities

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  • Wan, Qin
  • Pan, Hongyu
  • Huang, Jinbo

Abstract

This paper investigates the impact of the business environment (BE) on the within-firm pay gap (WFPG) by using data on listed firms from 233 cities in China. The main finding is that a better BE reduces the WFPG between management and regular employees. After a series of endogeneity treatments and robustness tests, this conclusion remains unchanged. The results of mechanism analysis suggest that intensifying market competition and the alleviating agency problems are two important channels for this effect. Heterogeneity tests indicate a stronger effect for non-state owned enterprises, firms with worse governance, and firms in noncompetitive industries. Additional analysis indicates that human resources, the innovation environment, and financial services are the main factors through which the BE affects the WFPG. This paper provides empirical insights for practical application.

Suggested Citation

  • Wan, Qin & Pan, Hongyu & Huang, Jinbo, 2024. "Can improving the business environment narrow the within-firm pay gap? Evidence from data on 233 Chinese cities," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:pacfin:v:88:y:2024:i:c:s0927538x24003275
    DOI: 10.1016/j.pacfin.2024.102575
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    More about this item

    Keywords

    Business environment; Within-firm pay gap; Market competition; Agency problem;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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