Wage Dispersion and Firm Productivity in Different Working Environments
This article investigates the impact of wage dispersion on firm productivity in different working environments. More precisely, it examines the interaction with: (i) the skills of the workforce, using a more appropriate indicator than the standard distinction between white- and blue-collar workers, and (ii) the uncertainty of the firm economic environment, which has, to our knowledge, never been explored on an empirical basis. Using detailed cross-sectional linked employer-employee data for Belgium, we find a hump-shaped relationship between (conditional) wage dispersion and firm productivity. This result suggests that up to (beyond) a certain level of wage dispersion, the incentive effects of 'tournaments' dominate (are dominated by) 'fairness' and/or 'sabotage' considerations. Findings also show that the intensity of the relationship is stronger for highly skilled workers and in more stable environments. This might be explained by the fact that monitoring costs and production-effort elasticity are greater for highly skilled workers, and that in the presence of high uncertainty, workers have less control over their effort-output relation, and associate higher uncertainty with more unfair environments. © Blackwell Publishing Ltd/London School of Economics 2010.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Sep 2011|
|Publication status:||Published in: British journal of industrial relations (2011) v.49 n° 3,p.460-485|
|Contact details of provider:|| Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles|
Web page: http://difusion.ulb.ac.be
More information through EDIRC
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.:
- Foss, Nicolai J. & Laursen, Keld, 2005.
"Performance pay, delegation and multitasking under uncertainty and innovativeness: An empirical investigation,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 58(2), pages 246-276, October.
- Nicolai J. Foss & Keld Laursen, 2002. "Performance Pay, Delegation, and Multitasking under Uncertainty and Innovativeness An Empirical Investigation," DRUID Working Papers 02-14, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Winter-Ebmer, Rudolf & Zweimuller, Josef, 1999.
"Intra-Firm Wage Dispersion and Firm Performance,"
Wiley Blackwell, vol. 52(4), pages 555-572.
- Winter-Ebmer, Rudolf & Zweimüller, Josef, 1997. "Intra-firm Wage Dispersion and Firm Performance," CEPR Discussion Papers 1621, C.E.P.R. Discussion Papers.
- 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.
- 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.
- 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.
- Thierry Lallemand & Robert Plasman & François Rycx, 2009.
"Wage structure and firm productivity in Belgium,"
ULB Institutional Repository
2013/8733, ULB -- Universite Libre de Bruxelles.
- Thierry Lallemand & Robert Plasman & Francois Rycx, 2007. "Wage Structure and Firm Productivity in Belgium," NBER Working Papers 12978, National Bureau of Economic Research, Inc.
- Robert Plasman & Thierry Lallemand & François Rycx, 2005. "Wage structure and firm productivity in Belgium," ULB Institutional Repository 2013/8058, ULB -- Universite Libre de Bruxelles.
- Edward P. Lazear, 1995.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262121883, September.
- Donald Richards & Robert Guell, 1998. "Baseball success and the structure of salaries," Applied Economics Letters, Taylor & Francis Journals, vol. 5(5), pages 291-296.
- 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.
- Milgrom, Paul & Roberts, John, 1990. "The Efficiency of Equity in Organizational Decision Processes," American Economic Review, American Economic Association, vol. 80(2), pages 154-159, May.
- Martins, Pedro S., 2008.
"Dispersion in wage premiums and firm performance,"
Elsevier, vol. 101(1), pages 63-65, October.
- 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.
- 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.
- 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.
- Paul R. Milgrom., 1987.
"Employment Contracts, Influence Activities and Efficient Organization Design,"
Economics Working Papers
8741, University of California at Berkeley.
- Milgrom, Paul R, 1988. "Employment Contracts, Influence Activities, and Efficient Organization Design," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 42-60, February.
- Milgrom, Paul R., 1987. "employment contracts, influence activities and efficient organization design," Department of Economics, Working Paper Series qt6pf6c5j6, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- 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.
- Erling Barth, 2008.
"Who pays for performance?,"
International Journal of Manpower,
Emerald Group Publishing, vol. 29(1), pages 8-29, March.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
- Heyman, Fredrik, 2002.
"Pay Inequality and Firm Performance: Evidence from Matched Employer-Employee Data,"
Working Paper Series
186, Trade Union Institute for Economic Research.
- Fredrik Heyman, 2005. "Pay inequality and firm performance: evidence from matched employer-employee data," Applied Economics, Taylor & Francis Journals, vol. 37(11), pages 1313-1327.
- 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.
- 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.
- Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-580, June.
- Main, Brian G M & O'Reilly, Charles A, III & Wade, James, 1993. "Top Executive Pay: Tournament or Teamwork?," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 606-628, October.
- Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
When requesting a correction, please mention this item's handle: RePEc:ulb:ulbeco:2013/169520. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)
If references are entirely missing, you can add them using this form.