IDEAS home Printed from https://ideas.repec.org/p/cgs/wpaper/8.html
   My bibliography  Save this paper

Dispersion in Wage Premiums and Firm Performance

Author

Listed:
  • Pedro S. Martins

Abstract

Using matched employer-employee panel data, we estimate measures of pay dispersion per firm-year that take into account both rm and worker unobserved heterogeneity. Unlike research that controls only for differences in observables, we nd that within-firm pay inequality is significantly associated to lower firm performance.

Suggested Citation

  • 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.
  • Handle: RePEc:cgs:wpaper:8
    as

    Download full text from publisher

    File URL: http://webspace.qmul.ac.uk/pmartins/CGRWP08.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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 841-864, October.
    2. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    4. 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 755-782, October.
    5. Thierry Lallemand & Robert Plasman & François Rycx, 2009. "Wage Structure and Firm Productivity in Belgium," NBER Chapters,in: The Structure of Wages: An International Comparison, pages 179-215 National Bureau of Economic Research, Inc.
    6. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    7. Winter-Ebmer, Rudolf & Zweimuller, Josef, 1999. "Intra-Firm Wage Dispersion and Firm Performance," Kyklos, Wiley Blackwell, vol. 52(4), pages 555-572.
    8. 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 262-280, April.
    9. Pedro S. Martins, 2007. "Heterogeneity In Real Wage Cyclicality," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 684-698, November.
    10. John M. Abowd (corresponding) & Francis Kramarz, 2004. "Are Good Workers Employed by Good Firms? A Simple Test of Positive Assortative Matching Models," Econometric Society 2004 North American Winter Meetings 385, Econometric Society.
    11. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Heski Bar-Isaac & Ian Jewitt & Clare Leaver, 2007. "Information and Human Capital Managment," Working Papers 07-28, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Cheng, Wenya & Morrow, John & Tacharoen, Kitjawat, 2012. "Productivity as if space mattered: an application to factor markets across China," LSE Research Online Documents on Economics 48930, London School of Economics and Political Science, LSE Library.
    3. Beatriz Muriel, 2011. "Rethinking Earnings Determinants in the Urban Areas of Bolivia," Development Research Working Paper Series 06/2011, Institute for Advanced Development Studies.
    4. Simon Gächter & Daniele Nosenzo & Martin Sefton, 2012. "The Impact of Social Comparisons on Reciprocity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1346-1367, December.
    5. Kampelmann, Stephan & Rycx, François, 2012. "The impact of educational mismatch on firm productivity: Evidence from linked panel data," Economics of Education Review, Elsevier, vol. 31(6), pages 918-931.
    6. Gross, Till & Guo, Christopher & Charness, Gary, 2015. "Merit pay and wage compression with productivity differences and uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 233-247.
    7. Benoît Mahy & François Rycx & Mélanie Volral, 2011. "Wage Dispersion and Firm Productivity in Different Working Environments," British Journal of Industrial Relations, London School of Economics, vol. 49(3), pages 460-485, September.
    8. Pedro S. Martins & Luiz A. Esteves, 2008. "Foreign Ownership, Employment and Wages in Brazil: Evidence from Acquisitions, Divestments and Job Movers," Working Papers 15, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    9. Nam Tran-Quy & Almas Heshmati, 2009. "Measurements and Determinants of Pay Inequality and its Impacts on Firms Performance in Vietnam," TEMEP Discussion Papers 200930, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2009.
    10. Alfonso Arpaia & Gilles Mourre, 2012. "Institutions And Performance In European Labour Markets: Taking A Fresh Look At Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 1-41, February.
    11. Rasmus Lentz & Suphanit Piyapromdee & Jean-Marc Robin, 2018. "On Worker and Firm Heterogeneity in Wages and Employment Mobility: Evidence from Danish Register Data," PIER Discussion Papers 91, Puey Ungphakorn Institute for Economic Research, revised Aug 2018.
    12. Gabriel Burdin, 2012. "Does workers’ control affect firm survival? Evidence from Uruguay," Department of Economics University of Siena 641, Department of Economics, University of Siena.
    13. Gächter, Simon & Thöni, Christian, 2010. "Social comparison and performance: Experimental evidence on the fair wage-effort hypothesis," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 531-543, December.
    14. Vera Rocha & Mirjam van Praag & Anabela Carneiro, 2015. "Deviating from the benchmarks: Human capital inputs and the survival of new startups," CEF.UP Working Papers 1502, Universidade do Porto, Faculdade de Economia do Porto.
    15. Pedro S. Martins, 2015. "The Diversity of Personnel Practices and Firm Performance," Working Papers 62, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    16. 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.
    17. Ambra Poggi, 2013. "Labor mobility network and intra firm wage dispersion," LABORatorio R. Revelli Working Papers Series 133, LABORatorio R. Revelli, Centre for Employment Studies.
    18. Grigorios Spanos, 2015. "Sorting Within and Across French Production Hierarchies," AMSE Working Papers 1524, Aix-Marseille School of Economics, Marseille, France.
    19. Beatriz Muriel Hernández, 2016. "An Analysis of Firm Characteristics as Earnings Determinants: The Urban Bolivia Case," Development Research Working Paper Series 04/2016, Institute for Advanced Development Studies.
    20. Benoît Mahy & François Rycx & Mélanie Volral, 2011. "Does Wage Dispersion Make All Firms Productive?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(4), pages 455-489, September.
    21. Kampkötter, Patrick & Sliwka, Dirk, 2011. "Differentiation and Performance: An Empirical Investigation on the Incentive Effects of Bonus Plans," IZA Discussion Papers 6070, Institute for the Study of Labor (IZA).
    22. Rocha, Vera & van Praag, Mirjam C. & Folta, Timothy B. & Carneiro, Anabela, 2016. "Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success," IZA Discussion Papers 9919, Institute for the Study of Labor (IZA).
    23. Dai, Yunhao & Kong, Dongmin & Xu, Jin, 2017. "Does fairness breed efficiency? Pay gap and firm productivity in China," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 406-422.
    24. Grigorios Spanos, 2015. "Sorting Within and Across French Production Hierarchies," Working Papers halshs-01163607, HAL.
    25. Arnd Kölling, 2014. "Labor Demand and Unequal Payment: Does Wage Inequality matter? Analyzing the Influence of Intra-firm Wage Dispersion on Labor Demand with German Employer-Employee Data," Working Paper Series in Economics 326, University of Lüneburg, Institute of Economics.

    More about this item

    Keywords

    Wage policies; Worker heterogeneity; Fairness;

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cgs:wpaper:8. 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: (Pedro S. Martins). General contact details of provider: http://edirc.repec.org/data/cgqmwuk.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.