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

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  • Nils Braakmann

    () (Institute of Economics, Leuphana University of Lüneburg)

Abstract

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.

Suggested Citation

  • Nils Braakmann, 2008. "Intra-firm wage inequality and firm performance – First evidence from German linked employer-employee-data," Working Paper Series in Economics 77, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:77
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    References listed on IDEAS

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    Cited by:

    1. Simon Gächter & Daniele Nosenzo & Martin Sefton, 2012. "The Impact of Social Comparisons on Reciprocity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1346-1367, December.
    2. Benoît Mahy & François Rycx & Mélanie Volral, 2011. "Wage Dispersion and Firm Productivity in Different Working Environments," British Journal of Industrial Relations, London School of Economics, vol. 49(3), pages 460-485, September.
    3. Benoît Mahy & François Rycx & Mélanie Volral, 2011. "Does Wage Dispersion Make All Firms Productive?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(4), pages 455-489, September.
    4. Arnd Kölling, 2014. "Labor Demand and Unequal Payment: Does Wage Inequality matter? Analyzing the Influence of Intra-firm Wage Dispersion on Labor Demand with German Employer-Employee Data," Working Paper Series in Economics 326, University of Lüneburg, Institute of Economics.

    More about this item

    Keywords

    Wage dispersion; labor productivity;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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