How does the position in business group hierarchies affect workers’ wages?

Hartmut Egger (), Elke Jahn and Stefan Kornitzky

Journal of Economic Behavior & Organization, 2022, vol. 194, issue C, 244-263

Abstract: We merge firm-level data on ownership linkages with administrative data on German workers to analyze how the position in a business group hierarchy affects workers’ wages. To acknowledge that ownership linkages are not one-directional, we propose an index of hierarchical distance to the ultimate owner that accounts for the complex network structure of business groups. After controlling for unobserved heterogeneity, we find a positive effect of larger hierarchical distance to the ultimate owner of a business group on workers’ wages. To explain this finding, we develop a monitoring-based theory of business groups. Our model predicts higher wages to prevent shirking by workers if a larger hierarchical distance to the ultimate owner is associated with lower monitoring efficiency.

Keywords: Business groups; Ownership networks; Workers wages; Difference-in-difference; Hierarchical distance (search for similar items in EconPapers)
JEL-codes: C23 J31 L23 (search for similar items in EconPapers)
Date: 2022
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Working Paper: How Does the Position in Business Group Hierarchies Affect Workers' Wages? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:194:y:2022:i:c:p:244-263

DOI: 10.1016/j.jebo.2021.12.011

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