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The Influence of Pay Transparency on Inequity, Inequality, and the Performance-Basis of Pay in Organizations

Author

Listed:
  • Tomasz Obloj

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Todd Zenger

Abstract

Recent decades have witnessed a growing focus on two distinct income patterns: persistent pay inequity, particularly a gender pay gap, and growing pay inequality. Pay transparency is widely advanced as a remedy for both. Yet we know little about the systemic influence of this policy on the evolution of pay practices within organizations. To address this void, we assemble a novel data set combining detailed performance, demographic and salary data for approximately 100,000 US academics between 1997 and 2017. We then exploit staggered shocks to wage transparency to explore how this change reshapes pay practices. We find evidence that pay transparency causes significant increases in both the equity and equality of pay, and significant and sizeable reductions in the link between pay and individually-measured performance.

Suggested Citation

  • Tomasz Obloj & Todd Zenger, 2020. "The Influence of Pay Transparency on Inequity, Inequality, and the Performance-Basis of Pay in Organizations," Working Papers hal-02896651, HAL.
    • Handle: RePEc:hal:wpaper:hal-02896651
    DOI: 10.2139/ssrn.3523828
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    Cited by:

    1. Matthias Fahn & Giorgio Zanarone, 2021. "Pay Transparency under Subjective Performance Evaluation," Economics working papers 2021-02, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Flynn, James, 2022. "Salary disclosure and individual effort: Evidence from the National Hockey League," Journal of Economic Behavior & Organization, Elsevier, vol. 202(C), pages 471-497.
    3. Matthias Fahn & Giorgio Zanarone, 2022. "Transparency in relational contracts," Strategic Management Journal, Wiley Blackwell, vol. 43(5), pages 1046-1071, May.

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