Status, Relative Pay, and Wage Growth: Evidence from M&A

Illoong Kwon () and Eva Meyersson Milgrom ()
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Eva Meyersson Milgrom: Stanford University

No 07-026, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: We use evidence from worker turnover following M&A events to show that workers’ choices to leave the firm depend on changes in workers’ relative standing, or status, in terms of wage and rank. Our results show that social, rather than pecuniary, preference drives these choices. We also show that social preference varies with reference group. When worker's expected status within a group of co-workers in the same occupation increases, workers are less likely to quit. In contrast, when workers’ expected status compared to all workers within the same firm increases, they are more likely to quit. Moreover, for workers who lose status during M&A, the loss of social rewards is compensated by faster wage growth, suggesting a market for status.

Keywords: wage growth; status; pay; promotion; compensation (search for similar items in EconPapers)
JEL-codes: J29 J39 (search for similar items in EconPapers)
Date: 2007-04
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Citations: View citations in EconPapers (4)

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