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Intra‐Firm Wage Dispersion and Firm Performance: Evidence from Linked Employer‐Employee Data
Author(s) -
Lallemand Thierry,
Plasman Robert,
Rycx François
Publication year - 2004
Publication title -
kyklos
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 58
eISSN - 1467-6435
pISSN - 0023-5962
DOI - 10.1111/j.0023-5962.2004.00268.x
Subject(s) - wage dispersion , group cohesiveness , simultaneity , dispersion (optics) , wage , economics , labour economics , efficiency wage , psychology , social psychology , physics , classical mechanics , optics
SUMMARY This paper examines the relationship between intra‐firm wage dispersion and firm performance in large Belgian firms using a unique matched employer‐employee data set. On the basis of the Winter‐Ebmer and Zweimüller's (1999) methodology, we find a positive and significant relationship between intra‐firm wage dispersion and profits per capita, even when controlling for individual and firm characteristics and addressing potential simultaneity problems. Results also suggest that the intensity of this relationship is stronger for blue‐collar workers and within firms with a high degree of monitoring. These findings are more in line with the ‘tournament’ models than with the ‘fairness, morale and cohesiveness’ models.