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Intra-firm Wage Dispersion and Firm Performance

  • Rudolf Winter-Ebmer
  • Josef Zweimueller

Personnel economics has put forward conflicting arguments concerning the impact of increased wage dispersion within a firm on the productivity of its workers. Besides giving more incentives, bigger wage differentials might also give rise to less co-operation and more politicking amongst workers resulting in worse outcomes. We try to shed light on these issues using panel data for Austrian firms. As indicators for firm performance we use standardised wages. For white-collar wages the following picture emerges: more dispersion leads to higher earnings up to some point where the relation changes its direction. For blue-collar wages we find a positive association between dispersion and standardised wages between firms, but no relation within firms over time.

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Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 008.

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  1. Falkinger, Josef, 1999. "Social instability and redistribution of income," European Journal of Political Economy, Elsevier, vol. 15(1), pages 35-51, March.
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  19. 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.
  20. Winter-Ebmer, Rudolf, 1994. "Endogenous Growth, Human Capital, and Industry Wages," Bulletin of Economic Research, Wiley Blackwell, vol. 46(4), pages 289-314, October.
  21. repec:sae:ilrrev:v:43:y:1990:i:3:p:13-29 is not listed on IDEAS
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