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Intra-firm Wage Dispersion and Firm Performance

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  • Winter-Ebmer, Rudolf
  • Zweimüller, Josef

Abstract

Personnel economics has suggested conflicting arguments about the impact of increased wage dispersion within firms on workers’ productivity and firm performance. Besides giving more advancement incentives, bigger wage differentials might also give rise to less cooperation and more politics between workers resulting in worse outcomes. We try to answer these questions using panel data for Austrian firms. As indicators for firm performance we use employment growth and standardized wages. For white-collar wages the following picture emerges: more dispersion leads to higher earnings up to some point where the relation changes direction. For blue-collar wages we find a positive association between dispersion and standardized wages between firms, but no relation within firms over time. For employment growth the results are ambiguous.

Suggested Citation

  • Winter-Ebmer, Rudolf & Zweimüller, Josef, 1997. "Intra-firm Wage Dispersion and Firm Performance," CEPR Discussion Papers 1621, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1621
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    References listed on IDEAS

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    More about this item

    Keywords

    Firm Productivity; Incentives; Wage Dispersion;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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