The Effect of Wage Dispersion on Team Outcome and the Way Team Outcome is Produced

34 Pages Posted: 16 Nov 2010 Last revised: 25 Oct 2011

See all articles by Egon P. Franck

Egon P. Franck

University of Zurich - Department of Business Administration (IBW)

Stephan Nüesch

University of Muenster

Date Written: November 16, 2010

Abstract

The impact of intra-team pay dispersion on team productivity is a highly discussed issue. On the one hand, wage differentials provide incentives for higher employee effort. On the other hand, pay inequality may reduce team cohesiveness and increase feelings of relative deprivation leading to lower performance. Analyzing non-linear effects of wage dispersion in professional soccer, we find empirical evidence that team performance is strongest when there is either very high or very low wage inequality. Medium levels produce the weakest team performance. In addition, we show that the pay structure affects the team’s playing style even after controlling for team and coach heterogeneity. We discuss the theoretical and managerial implications as well as the limits of generalization.

Suggested Citation

Franck, Egon P. and Nüesch, Stephan, The Effect of Wage Dispersion on Team Outcome and the Way Team Outcome is Produced (November 16, 2010). Applied Economics, Vol. 43, pp. 3037-3049, 2011, Available at SSRN: https://ssrn.com/abstract=1710080

Egon P. Franck

University of Zurich - Department of Business Administration (IBW) ( email )

Plattenstrasse 14
Zurich 8032
Switzerland
+41 1 634 28 45 (Phone)

Stephan Nüesch (Contact Author)

University of Muenster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/uf

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