 Entry deregulation, firm organization, and wage inequalityDudley Cooke (), Ana Fernandes and Priscila Ferreira () International Journal of Industrial Organization, 2021, vol. 77, issue C Abstract: This paper identifies a causal link between changes in product market competition, firm reorganization and within-firm wage inequality. We exploit a unique episode of comprehensive firm entry deregulation as a quasi-natural experiment and use exceptionally detailed linked employer-employee data for the universe of private sector firms and workers in Portugal. Following deregulation affected firms flatten their hierarchies: the number of layers is reduced and managers’ span of control increased. Dropping a hierarchy layer is accompanied by a significant reduction in wage inequality within the firm, by 8% for the average pay ratio between the top and the bottom layer and 4.4% for the 90-50 percentile wage ratio, showing that there are real changes arising from firm reorganization. Overall wage dispersion, measured by the standard deviation of hourly pay, is also reduced. We discuss mechanisms and interpretations for these changes. Keywords: Firm entry deregulation; Hierarchy layers; Internal organization; Product market competition; Span of control; Wage inequality (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:77:y:2021:i:c:s0167718721000564 DOI: 10.1016/j.ijindorg.2021.102763 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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