The Influence of Pay Transparency on Inequity, Inequality, and the Performance-Basis of Pay

36 Pages Posted: 24 Jan 2020 Last revised: 6 May 2020

See all articles by Tomasz Obloj

Tomasz Obloj

HEC Paris - Strategy & Business Policy

Todd Zenger

University of Utah

Date Written: May 5, 2020

Abstract

Recent decades have witnessed a growing focus on two distinct income patterns: persistent pay inequity, particularly a gender pay gap, and growing pay inequality. Pay transparency is widely advanced as a remedy for both. Yet we know little about the systemic influence of this policy on the evolution of pay practices within organizations. To address this void, we assemble a novel data set combining detailed performance, demographic and salary data for approximately 100,000 US academics between 1997 and 2017. We then exploit staggered shocks to wage transparency to explore how this change reshapes pay practices. We find evidence that pay transparency causes significant increases in both the equity and equality of pay, and significant and sizeable reductions in the link between pay and individually-measured performance.

Keywords: Transparency, Gender Pay Gap, Incentives

Suggested Citation

Obloj, Tomasz and Zenger, Todd R., The Influence of Pay Transparency on Inequity, Inequality, and the Performance-Basis of Pay (May 5, 2020). HEC Paris Research Paper No. SPE-2020-1359, Available at SSRN: https://ssrn.com/abstract=3523828 or http://dx.doi.org/10.2139/ssrn.3523828

Tomasz Obloj (Contact Author)

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

Todd R. Zenger

University of Utah ( email )

David Eccles School of Business
1655 East Campus Center Drive
Salt Lake City, UT 84112
United States
801 585-3981 (Phone)
801 581-7939 (Fax)

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