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Intra-firm wage inequality and firm performance – First evidence from German linked employer-employee-data

  • Nils Braakmann

    ()

    (Institute of Economics, Leuphana University of Lüneburg)

Economic theory suggests both positive and negative relationships between intra- firm wage inequality and productivity. This paper contributes to the growing empirical literature on this subject. We combine German employer-employee-data for the years 1995-2005 with inequality measures using the whole wage distribution of a firm and rely on dynamic panel-data estimators to control for unobserved heterogeneity, simultaneity problems and possible state dependence. Our results indicate a relative minor influence of intra-firm wage inequality on firm productivity. If anything, they provide some support for a view suggesting that some inequality may be beneficial, while too much leads to a detrimental eect on productivity.

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Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 77.

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Length: 31 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:lue:wpaper:77
Contact details of provider: Web page: http://leuphana.de/institute/ivwl.html

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  1. François Rycx & Thierry Lallemand & Robert Plasman, 2004. "Intra-firm wage dispersion and firm performance: evidence from linked employer-employee data," ULB Institutional Repository 2013/781, ULB -- Universite Libre de Bruxelles.
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  13. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
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  18. 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 262-80, April.
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