The Dispersion of Employees' Wage Increases and Firm Performance

Christian Grund and Niels Christian Westergård-Nielsen

No 3/2005, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: In this contribution we examine the interrelation between intra-firm wage increases and firm performance. Previous studies have focused on the dispersion of wages in order to examine for the empirical dominance of positive monetary incentive effects compared to adverse effects due to fairness considerations. We argue that the dispersion of wage increases rather than wage levels is a crucial measure for monetary incentives in firms. The larger the dispersion of wage increases the higher the amount of monetary incentives in firms. In contrast, huge wage inequality without any promotion possibilities does not induce any monetary incentives. Evidence from unique Danish linked employer employee data shows that large dispersion of wage growth within firms is generally connected with low firm performance. The results are mainly driven by white collar rather than blue collar workers.

Keywords: Fairness; Firm performance; Inequality; Monetary Incentives; Wage increases; Wage Dispersion (search for similar items in EconPapers)
JEL-codes: J31 L25 M52 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/22909/1/bgse3_2005.pdf (application/pdf)

Related works:
Journal Article: The Dispersion of Employees' Wage Increases and Firm Performance (2008)
Working Paper: The Dispersion of Employees’ Wage Increases and Firm Performance (2004)
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:zbw:bonedp:32005

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().