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Intra-firm Wage Dispersion and Firm Performance

  • Winter-Ebmer, Rudolf
  • Zweimüller, Josef

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1621.

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Date of creation: Apr 1997
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Handle: RePEc:cpr:ceprdp:1621
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  1. Blanchflower, David G & Oswald, Andrew J & Garrett, Mario D, 1990. "Insider Power in Wage Determination," Economica, London School of Economics and Political Science, vol. 57(226), pages 143-70, May.
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  7. Rudolf Winter-Ebmer & Josef Zweimueller, . "Firm Size Wage Differentials in Switzerland: Evidence from Job Changers," IEW - Working Papers 001, Institute for Empirical Research in Economics - University of Zurich.
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  19. Fichtenbaum, Rudy & Shahidi, Hushang, 1988. "Truncation Bias and the Measurement of Income Inequality," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 335-37, July.
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  23. Falkinger, Josef, 1999. "Social instability and redistribution of income," European Journal of Political Economy, Elsevier, vol. 15(1), pages 35-51, March.
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