Pay Inequality and Firm Performance: Evidence from Matched Employer-Employee Data

Fredrik Heyman

No 186, Working Paper Series from Trade Union Institute for Economic Research

Abstract: This paper uses a large matched employer-employee data set for Sweden to analyse several predictions from tournament theory. For white-collar workers, a positive effect of intra-firm wage dispersion on profits and average pay is found. This result is robust to controls for human capital characteristics and firm fixed-effects as well as to instrumenting the wage dispersion variable. Using data on around 10,000 managers, the same relationships are also found for executives. Further results include a positive relationship between market demand volatility and wage dispersion for managers, and a negative effect of the number of managers (contestants) on managerial pay spread.

Keywords: Wage dispersion; Firm performance; Tournament models; Matched employer-employee data (search for similar items in EconPapers)
JEL-codes: J31 J41 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2002-12-19
References: Add references at CitEc
Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Pay inequality and firm performance: evidence from matched employer-employee data (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:fiefwp:0186

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