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Does the Position in Business Group Hierarchies Affect Workers' Wages?

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  • Jahn, Elke
  • Egger, Hartmut
  • Kornitzky, Stefan

Abstract

We merge firm-level data on ownership linkages with administrative data on German workers to analyze how the position in a business group hierarchy affects workers' wages. To acknowledge that ownership linkages are not onedirectional, we propose an index to measure hierarchical distance to the ultimate owner. After controlling for unobserved heterogeneity and selection into the business group hierarchy, we find a positive effect of larger hierarchical distance to the ultimate owner of a business group on workers' wages. This result is in line with a monitoring-based theory of business group hierarchies, in which larger hierarchical distance to the ultimate owner is associated with lower monitoring efficiency and thus higher wage payments to incentivize workers

Suggested Citation

  • Jahn, Elke & Egger, Hartmut & Kornitzky, Stefan, 2021. "Does the Position in Business Group Hierarchies Affect Workers' Wages?," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242374, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc21:242374
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    More about this item

    Keywords

    Business groups; ownership networks; workers wages; differencein-difference; hierarchical distance;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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