Intra-firm wage inequality and firm performance – First evidence from German linked employer-employee-data
Economic theory suggests both positive and negative relationships between intrafirm 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 effect on productivity.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
- 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.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
- 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.
- Hibbs Jr., Douglas A. & Locking, Håkan, 2000. "Wage Dispersion and Productive Efficiency: Evidence For Sweden," Working Papers in Economics 21, University of Gothenburg, Department of Economics.
- Christian Grund & Niels Westergaard-Nielsen, 2008. "The Dispersion of Employees' Wage Increases and Firm Performance," ILR Review, Cornell University, ILR School, vol. 61(4), pages 485-501, July.
- Grund, Christian & Westergård-Nielsen, Niels C., 2004. "The Dispersion of Employees’ Wage Increases and Firm Performance," IZA Discussion Papers 1402, Institute for the Study of Labor (IZA).
- Christian Grund & Niels Westergaard-Nielsen, 2005. "The Dispersion of Employees' Wage Increases and Firm Performance," Bonn Econ Discussion Papers bgse3_2005, University of Bonn, Germany.
- Winter-Ebmer, Rudolf & Zweimuller, Josef, 1999. "Intra-Firm Wage Dispersion and Firm Performance," Kyklos, Wiley Blackwell, vol. 52(4), pages 555-572.
- Rudolf Winter-Ebmer & Josef Zweimueller, "undated". "Intra-firm Wage Dispersion and Firm Performance," IEW - Working Papers 008, Institute for Empirical Research in Economics - University of Zurich.
- Winter-Ebmer, Rudolf & Zweimüller, Josef, 1997. "Intra-firm Wage Dispersion and Firm Performance," CEPR Discussion Papers 1621, C.E.P.R. Discussion Papers.
- Bingley, P. & Eriksson, T, 2001. "Pay Spread and Skewness. Employee Effort and Firm Productivity," Papers 01-2, Aarhus School of Business - Department of Economics.
- Bingley, Paul & Eriksson, Tor, 2001. "Pay Spread and Skewness, Employee Effort and Firm Productivity," Working Papers 01-2, University of Aarhus, Aarhus School of Business, Department of Economics.
- Jonathan S. Leonard, 1990. "Executive Pay and Firm Performance," ILR Review, Cornell University, ILR School, vol. 43(3), pages 13, April.
- DepkenII, Craig A., 2000. "Wage disparity and team productivity: evidence from major league baseball," Economics Letters, Elsevier, vol. 67(1), pages 87-92, April.
- P. B. Beaumont & R. I. D. Harris, 2003. "Internal Wage Structures and Organizational Performance," British Journal of Industrial Relations, London School of Economics, vol. 41(1), pages 53-70, 03.
- 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.
- David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
- Akerlof, George A & Yellen, Janet L, 1988. "Fairness and Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 44-49, May.
- Thierry Lallemand & Robert Plasman & François Rycx, 2004. "Intra-Firm Wage Dispersion and Firm Performance: Evidence from Linked Employer-Employee Data," Kyklos, Wiley Blackwell, vol. 57(4), pages 533-558, November.
- 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.
- Levine, David I., 1991. "Cohesiveness, productivity, and wage dispersion," Journal of Economic Behavior & Organization, Elsevier, vol. 15(2), pages 237-255, March.
- Levine, David, 1989. "Cohesiveness, Productivity, and Wage Dispersion," Institute for Research on Labor and Employment, Working Paper Series qt8kd4d0p4, Institute of Industrial Relations, UC Berkeley.
- Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-580, June.
- Donald Richards & Robert Guell, 1998. "Baseball success and the structure of salaries," Applied Economics Letters, Taylor & Francis Journals, vol. 5(5), pages 291-296.
- M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters,in: Regional Climate Change and Variability, chapter 1 Edward Elgar Publishing.
- Uwe Jirjahn & Kornelius Kraft, 2007. "Intra-firm Wage Dispersion and Firm Performance - Is There a Uniform Relationship?," Kyklos, Wiley Blackwell, vol. 60(2), pages 231-253, 05.
- repec:sae:ilrrev:v:43:y:1990:i:3:p:13-29 is not listed on IDEAS
- Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Frey, Bruno S., 1997. "On the relationship between intrinsic and extrinsic work motivation1," International Journal of Industrial Organization, Elsevier, vol. 15(4), pages 427-439, July. Full references (including those not matched with items on IDEAS)