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http://hdl.handle.net/10419/35796
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| Title: | | Performance pay and within-firm wage inequality  |
| Authors: | | Barth, Erling Bratsberg, Bernt Hægeland, Torbjørn Raaum, Oddbjørn |
| Issue Date: | | 2009 |
| Series/Report no.: | | IZA discussion papers 4137 |
| Abstract: | | This paper examines the impact of performance-related pay on wage differentials within firms. Our theoretical framework predicts that, compared to a fixed pay system, pay schemes based on individual output increase within-firm wage inequality, while group-based bonuses have minor effects on wage dispersion. Theory also predicts an interaction between performance-related pay and union bargaining, where union power reduces the impact of performance pay on wage dispersion. The empirical contribution utilizes two recent Norwegian employer surveys, linked to a full set of individual employee pay records. A longitudinal sub-sample allows for identification based on fixed establishment effects. Introduction of performance-related pay is shown to raise residual wage inequality in nonunion firms, but not in firms with high union density. Our findings suggest that even though performance-related pay appears to be on the rise, the overall impact on wage dispersion is likely to be small, particularly in European countries with strong unions. |
| Subjects: | | Performance related pay wage inequality union bargaining |
| JEL: | | J31 J33 |
| Persistent Identifier of the first edition: | | urn:nbn:de:101:1-20090513352 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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