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Title:Does wage dispersion make all firms productive? PDF Logo
Authors:Mahy, Benoît
Rycx, Francois
Volral, Mélanie
Issue Date:2011
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5791
Abstract:This article puts the relationship between wage dispersion and firm productivity to an updated test, taking advantage of access to detailed Belgian linked employer-employee panel data. Controlling for simultaneity issues, time-invariant workplace characteristics and dynamics in the adjustment process of productivity, empirical results reveal the existence of a positive impact from conditional intra-firm wage dispersion to firm productivity (measured by the average value added per hour worked), which however decreases for higher dispersion levels. Findings thus suggest that the incentive effect of wage dispersion, predicted for instance by the tournament model, dominates fairness and/or sabotage considerations. Further results reveal that the influence of wage dispersion on firm productivity is stronger among firms with a larger proportion of highly skilled workers but does not depend on whether wages are collectively renegotiated at the firm level.
Subjects:wage dispersion
labour productivity
personnel economics
matched employer-employee panel data
JEL:J31
J24
M5
Persistent Identifier of the first edition:urn:nbn:de:101:1-201106224726
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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