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Management Practices, Pay, and Pay Inequality

Author

Listed:
  • Natália P. Monteiro

    (University of Minho)

  • Odd Rune Straume

    (University of Minho)

Abstract

We use rich Portuguese data to analyse the relationship between the use of different management practices and worker pay in a large representative sample of firms. We find that the overall score on the use of management practices is significantly associated with both higher average wages and higher within-firm wage dispersion. The positive relationship between management practices and average pay is present throughout the wage distribution and for all occupational skill groups, but is stronger for workers higher up in the wage distribution and in higher-skilled occupations. These results are driven by incentives-based management practices, in particular practices related to reward and promotion of high performers in the firm. We also identify a potential moderating role of works councils. Our results suggests that, in firms with works councils, a larger share of the gains from productivity-enhancing management practices is shared with workers, and these gains are more evenly distributed across the workforce.

Suggested Citation

  • Natália P. Monteiro & Odd Rune Straume, 2024. "Management Practices, Pay, and Pay Inequality," Journal of Labor Research, Springer, vol. 45(2), pages 254-304, June.
    • Handle: RePEc:spr:jlabre:v:45:y:2024:i:2:d:10.1007_s12122-024-09357-w
    DOI: 10.1007/s12122-024-09357-w
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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