Working Paper: CEPR ID: DP1621
Authors: Rudolf Winterebmer; Josef Zweimuller
Abstract: Personnel economics has suggested conflicting arguments about the impact of increased wage dispersion within firms on workers? productivity and firm performance. Besides giving more advancement incentives, bigger wage differentials might also give rise to less cooperation and more politics between workers resulting in worse outcomes. We try to answer these questions using panel data for Austrian firms. As indicators for firm performance we use employment growth and standardized wages. For white-collar wages the following picture emerges: more dispersion leads to higher earnings up to some point where the relation changes direction. For blue-collar wages we find a positive association between dispersion and standardized wages between firms, but no relation within firms over time. For employment growth the results are ambiguous.
Keywords: wage dispersion; incentives; firm productivity
JEL Codes: D31; J33; J53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage dispersion (J31) | blue-collar wages (J39) |
| wage dispersion (J31) | white-collar wages (J31) |
| wage dispersion (J31) | productivity (O49) |
| wage dispersion (J31) | employment growth (O49) |