The Sustainability Wage Gap

Philipp Krueger, Daniel Metzger and Jiaxin Wu
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Daniel Metzger: Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); European Corporate Governance Institute (ECGI); London School of Economics & Political Science (LSE) - Financial Markets Group
Jiaxin Wu: Stockholm School of Economics - Department of Finance

No 21-17, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We document a new channel through which a firm’s sustainability policies can contribute positively to its bottom line, by reducing labor costs and by enabling firms to recruit and retain workers that are highly skilled. Using detailed administrative employer-employee matched data from Sweden and a novel measure that quantifies the environmental sustainability of different economic activities, we document that workers earn about 10% lower wages in firms that operate in more sustainable sectors. We refer to this empirical regularity as the Sustainability Wage Gap. Exploiting heterogeneities in workers’ preferences for sustainable jobs, we show that the wage gap is larger for high-skilled workers, especially those with high non-cognitive skills, and increasing over time. We argue that our results are difficult to reconcile with many alternative interpretations suggested in prior research.

Keywords: Sustainable Finance; ESG; CSR; Sustainability; Allocation of Talent; Millennials; Non-monetary Preferences; Wages (search for similar items in EconPapers)
JEL-codes: G11 G38 J24 J28 J31 (search for similar items in EconPapers)
Pages: 104 pages
Date: 2021-03
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2117

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