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Wage structure and firm productivity in Belgium

  • Thierry Lallemand
  • Robert Plasman
  • François Rycx

The objective of this paper is twofold. First, we analyse the structure of wages within and between Belgian firms. Next, we examine how the productivity of these firms is influenced by their internal wage dispersion. To do so, we use a large matched employer-employee data set (i.e., a combination of the 1995 'Structure of Earnings' and 'Structure of Business' Surveys). On the basis of the methodology developed by Winter-Ebmer and Zweimuller (1999), we find that within-firm wage dispersion has a positive and significant effect on firm productivity. This result is robust to controls for individual and firm characteristics as well as to instrumenting the wage inequality variable. Findings also suggest that the intensity of this effect is stronger within firms with: i) a majority of blue-collar workers, and ii) a high degree of monitoring. These results are more in line with the 'tournament' models than with the 'fairness, morale and cohesiveness' models.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/8733.

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Date of creation: 2009
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Handle: RePEc:ulb:ulbeco:2013/8733
Contact details of provider: Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
Web page: http://difusion.ulb.ac.be

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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.
  2. Winter-Ebmer, Rudolf & Zweimuller, Josef, 1999. "Intra-Firm Wage Dispersion and Firm Performance," Kyklos, Wiley Blackwell, vol. 52(4), pages 555-72.
  3. Garen, John E, 1985. "Worker Heterogeneity, Job Screening, and Firm Size," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 715-39, August.
  4. Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier.
  5. 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.
  6. Carlo Dell'Aringa & Laura Pagani, 2007. "Collective Bargaining and Wage Dispersion in Europe," British Journal of Industrial Relations, London School of Economics, vol. 45(1), pages 29-54, 03.
  7. Mellow, Wesley, 1982. "Employer Size and Wages," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 495-501, August.
  8. Milgrom, Paul & Roberts, John, 1990. "The Efficiency of Equity in Organizational Decision Processes," American Economic Review, American Economic Association, vol. 80(2), pages 154-59, May.
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