Careers and Wages in Family Firms: Evidence from Matched Employer-Employee Data

Edoardo Di Porto, Marco Pagano, Vincenzo Pezone, Raffaele Saggio and Fabiano Schivardi

No 19787, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate compensation policies in family and non-family firms using a novel employer-employee matched dataset comprising nearly the universe of Italian incorporated firms and ownership information. Family firms pay significantly lower wages and offer slower and less rewarding careers. Differences in worker sorting account for half of the wage gap while productivity differences and compensating differentials explain little of the residual gap. The wage distribution in family firms is more compressed, with infrequent promotions. We rationalize this evidence with a model where family owners seek to maintain control, creating a “glass ceiling†that limits their employees’ career progression.

JEL-codes: D22 D23 D24 G32 G34 J24 J31 J32 J62 M12 M51 M52 M54 (search for similar items in EconPapers)
Date: 2024-12
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