Intra-firm wage inequality and firm performance – First evidence from German linked employer-employee-data

Nils Braakmann

No 77, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: Economic theory suggests both positive and negative relationships between intrafirm wage inequality and productivity. This paper contributes to the growing empirical literature on this subject. We combine German employer-employee-data for the years 1995-2005 with inequality measures using the whole wage distribution of a firm and rely on dynamic panel-data estimators to control for unobserved heterogeneity, simultaneity problems and possible state dependence. Our results indicate a relative minor influence of intra-firm wage inequality on firm productivity. If anything, they provide some support for a view suggesting that some inequality may be beneficial, while too much leads to a detrimental effect on productivity.

Keywords: Wage dispersion; labor productivity (search for similar items in EconPapers)
JEL-codes: J31 M52 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-02
New Economics Papers: this item is included in nep-bec, nep-eff and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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