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Status, Relative Pay, and Wage Growth: Evidence from M&A

Author

Listed:
  • Illoong Kwon

    () (Department of Economics, State University of New York at)

  • Eva M. Meyersson Milgrom

    () (Stanford University)

Abstract

We use evidence from worker turnover following M&A events to show that workers’ choices to leave the firm depend on changes in workers’ relative standing, or status, in terms of wage and rank. Our results show that social, rather than pecuniary, preference drives these choices. We also show that social preference varies with reference group. When worker's expected status within a group of co-workers in the same occupation increases, workers are less likely to quit. In contrast, when workers’ expected status compared to all workers within the same firm increases, they are more likely to quit. Moreover, for workers who lose status during M&A, the loss of social rewards is compensated by faster wage growth, suggesting a market for status.

Suggested Citation

  • Illoong Kwon & Eva M. Meyersson Milgrom, 2007. "Status, Relative Pay, and Wage Growth: Evidence from M&A," Discussion Papers 07-026, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:07-026
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    File URL: http://www-siepr.stanford.edu/repec/sip/07-026.pdf
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    References listed on IDEAS

    as
    1. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    2. Fershtman, Chaim & Murphy, Kevin M & Weiss, Yoram, 1996. "Social Status, Education, and Growth," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 108-132, February.
    3. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
    4. Daniel J. Zizzo & Andrew J. Oswald, 2001. "Are People Willing to Pay to Reduce Others'Incomes?," Annals of Economics and Statistics, GENES, issue 63-64, pages 39-65.
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    Cited by:

    1. Hensvik, Lena, 2011. "Manager impartiality? Worker-firm matching and the gender wage gap," Working Paper Series 2011:22, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Christian Pfeifer, 2009. "Adjustment of Deferred Compensation Schemes, Fairness Concerns, and Hiring of Older Workers," Working Paper Series in Economics 151, University of Lüneburg, Institute of Economics.
    3. Illong Kwon & Eva Meyersson Milgrom, 2010. "Working for Female Managers: Gender Hierarchy in the Workplace," Discussion Papers 10-012, Stanford Institute for Economic Policy Research.

    More about this item

    Keywords

    wage growth; status; pay; promotion; compensation;

    JEL classification:

    • J29 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Other
    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other

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