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The Impact of Wage Dispersion on Labor Productivity: Evidence from Finnish workers

Laura Arranz-Aperte

A chapter in New Analyses of Worker Well-Being, 2014, vol. 38, pp 77-103 from Emerald Publishing Ltd

Abstract: Abstract Using an extensive data set on Finnish workers during the years 1990–2002, we analyze the relation between dispersion of wages within plants and labor productivity. We find a positive and significant relation between dispersion of wages within plant and average sales per worker. This relation is quadratic when dispersion is conditioned on workers’ observable characteristics. We also find positive and significant relation between unconditional dispersion of wages within plant and value added per hours worked, while we find a non-significant relation between conditional wage dispersion and valued added per hours worked. Results indicate that the incentive effect of wage dispersion dominates fairness or sabotage considerations.

Keywords: Fairness; tournaments; wage dispersion; labor productivity; M52; J31; L25 (search for similar items in EconPapers)
Date: 2014
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