Labor Demand and Unequal Payments: Does Wage Dispersion Matter? Using German Employer-Employee Data to Analyze the Influence of Intra-Firm Wage Inequality on Labor Demand

Koelling Arnd ()
Additional contact information
Koelling Arnd: Department of Cooperative Studies, Hochschule fur Wirtschaft und Recht Berlin, Berlin, Germany

Review of Economics, 2017, vol. 68, issue 1, 1-39

Abstract: A theoretical analysis examines the relationship between intra-firm wage dispersion and employment at establishments. The analysis relies on the absence of a theoretical consensus regarding the influence of wage dispersion on labor demand. To prove the theoretical considerations, regressions were conducted on German linked employer-employee data from the Institute for Employment Research (LIAB) for 1996 through 2008. More specifically, fractional probit models for the panel data and a fixed effects regression with a log-odds transformation of the dependent variable were used to estimate the share equations of a labor demand model, including different measures of wage dispersion. The results illustrate a negative influence of the residual wage inequality that takes into account the composition of the workforce in the establishment. In addition, an increasing wage dispersion at the lower end of the wage distribution decreases the labor demand of the establishment; however, this leads to the estimates of the overall wage dispersion becoming insignificant.

Keywords: labor demand; wage dispersion; linked employer employee data (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/roe-2016-0011 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lus:reveco:v:68:y:2017:i:1:p:1-39:n:1

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/roe/html

DOI: 10.1515/roe-2016-0011

Access Statistics for this article

Review of Economics is currently edited by Michael Berlemann

More articles in Review of Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().