IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The Dispersion of Employees' Wage Increases and Firm Performance

  • Christian Grund
  • Niels Westergaard-Nielsen

Previous studies examining intra-firm wage dispersion and firm performance have focused on wage levels. The authors of this study argue that for purposes of comparing wage dispersion's positive incentive effects with its adverse morale effects, the dispersion of wage increases is more revealing than the dispersion of wage levels. It is reasonable to expect greater dispersion of wage increases to be associated with higher monetary incentives, but also with increased perceptions of unfairness. The authors' analysis of linked employer-employee data from Denmark for the years 1992-97 shows that the dispersion of wage growth within firms generally had a negative association with firm performance. The results are mainly driven by white-collar rather than blue-collar workers, perhaps because blue-collar wages are typically regulated by contracts and union rules that explicitly take account of fairness and equity.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 61 (2008)
Issue (Month): 4 (July)
Pages: 485-501

as
in new window

Handle: RePEc:ilr:articl:v:61:y:2008:i:4:p:485-501
Contact details of provider: Fax: 607-255-8016
Web page: http://www.ilr.cornell.edu/ilrreview/

More information through EDIRC

Order Information: Postal: 381 Ives East, Cornell University, Ithaca, NY 14853-3901
Web: http://digitalcommons.ilr.cornell.edu/ilrreview/ Email:


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.:

as in new window
  1. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-15, September.
  2. Grund, Christian, 2002. "The Wage Policy of Firms – Comparative Evidence for the U.S. and Germany from Personnel Data," IZA Discussion Papers 605, Institute for the Study of Labor (IZA).
  3. Marie-Claire Villeval & Tor Eriksson, 2004. "Other-Regarding Preferences and Performance Pay – An Experiment on Incentives and Sorting," Working Papers 0408, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  4. Ernst Fehr & Bettina Rockenbach, 2003. "Detrimental effects of sanctions on human altruism," Microeconomics 0305007, EconWPA.
  5. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  6. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 881-919, November.
  7. Christian Grund & Dirk Sliwka, 2002. "Envy and Compassion in Tournaments," Bonn Econ Discussion Papers bgse32_2002, University of Bonn, Germany.
  8. Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January.
  9. Akerlof, George A, 1984. "Gift Exchange and Efficiency-Wage Theory: Four Views," American Economic Review, American Economic Association, vol. 74(2), pages 79-83, May.
  10. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
  11. Hibbs, Douglas A, Jr & Locking, Hakan, 2000. "Wage Dispersion and Productive Efficiency: Evidence for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 755-82, October.
  12. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  13. Winter-Ebmer, Rudolf & Zweimuller, Josef, 1999. "Intra-Firm Wage Dispersion and Firm Performance," Kyklos, Wiley Blackwell, vol. 52(4), pages 555-72.
  14. Sandra Maximiano & Randolph Sloof & Joep Sonnemans, 2004. "Gift Exchange in a Multi-worker Firm," Tinbergen Institute Discussion Papers 04-100/1, Tinbergen Institute.
  15. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-24, December.
  16. Treble, John & van Gameren, Edwin & Bridges, Sarah & Barmby, Tim, 2001. "The internal economics of the firm: further evidence from personnel data," Labour Economics, Elsevier, vol. 8(5), pages 531-552, December.
  17. Alessandro Rossi & Massimo Warglien, 2001. "An Experimental Investigation of Fairness and Reciprocal Behavior in a Triangular Principal'-Multiagent Relationship," Quaderni DISA 046, Department of Computer and Management Sciences, University of Trento, Italy, revised 29 Jun 2003.
  18. Dohmen, Thomas & Kriechel, Ben & Pfann, Gerard A., 2003. "Monkey Bars and Ladders: The Importance of Lateral and Vertical Job Mobility in Internal Labor Market Careers," IZA Discussion Papers 867, Institute for the Study of Labor (IZA).
  19. Abrevaya, Jason, 2002. "Ladder tournaments and underdogs: lessons from professional bowling," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 87-101, January.
  20. Werner Güth & Manfred Königstein & Judit Kovács & Enikõ Zala-Mezõ, 2001. "Fairness Within Firms: The Case Of One Principal And Multiple Agents," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 53(2), pages 82-101, April.
  21. Guth, Werner & Tietz, Reinhard, 1990. "Ultimatum bargaining behavior : A survey and comparison of experimental results," Journal of Economic Psychology, Elsevier, vol. 11(3), pages 417-449, September.
  22. Michael Waldman, 2003. "Ex Ante versus Ex Post Optimal Promotion Rules: The Case of Internal Promotion," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 27-41, January.
  23. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  24. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 921-55, November.
  25. Main, Brian G M & O'Reilly, Charles A, III & Wade, James, 1993. "Top Executive Pay: Tournament or Teamwork?," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 606-28, October.
  26. Armin Falk & Michael Kosfeld, . "Distrust - The Hidden Cost of Control," IEW - Working Papers 193, Institute for Empirical Research in Economics - University of Zurich.
  27. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
  28. Krakel, Matthias, 2000. "Relative deprivation in rank-order tournaments," Labour Economics, Elsevier, vol. 7(4), pages 385-407, July.
  29. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-80, April.
  30. P. B. Beaumont & R. I. D. Harris, 2003. "Internal Wage Structures and Organizational Performance," British Journal of Industrial Relations, London School of Economics, vol. 41(1), pages 53-70, 03.
  31. 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.
  32. Cremer, Jacques, 1986. "Cooperation in Ongoing Organizations," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 33-49, February.
  33. Orrison, Alannah & Schotter, Andrew & Weigelt, Keith, 1997. "On the Design of Optimal Organizations Using Tournaments: An Experimental Examination," Working Papers 97-26, C.V. Starr Center for Applied Economics, New York University.
  34. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ilr:articl:v:61:y:2008:i:4:p:485-501. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ILR Review)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.