Owner Culture and Pay Inequality within Firms

78 Pages Posted: 23 Nov 2021

See all articles by Jan Bena

Jan Bena

University of British Columbia - Sauder School of Business

Guangli Lu

University of British Columbia, Sauder School of Business

Iris Wang

University of British Columbia (UBC) - Sauder School of Business

Date Written: November 18, 2021

Abstract

We examine the effect of culture on within-firm pay inequality by studying the pay setting behaviors of closely-held firms owned by immigrants in Canada. Using matched employer-employee-owner tax filing data, we show that within-firm pay inequality varies significantly with a firm owner’s country of origin. With-firm pay inequality is higher if the owner immigrated from a more individualistic country. To further isolate the effect of culture, we investigate the change in pay inequality among “employee stayers” after a change of the firm’s owners. We find that within-firm pay inequality increases in firms taken over by owners from more individualistic countries or from countries with higher within-firm pay inequality compared to prior owners’ countries. We find similar results using a subsample of the Accommodation and Food Services sector where the production is more homogenous and the confounding effect from the unobservable production technology difference is minimal. We also find similar results when the changes of firms’ owners are driven by the deaths of owners.

Keywords: national culture, pay inequality, individualism, immigration

JEL Classification: J31, J15, Z10

Suggested Citation

Bena, Jan and Lu, Guangli and Wang, Iris, Owner Culture and Pay Inequality within Firms (November 18, 2021). Available at SSRN: https://ssrn.com/abstract=3966530 or http://dx.doi.org/10.2139/ssrn.3966530

Jan Bena

University of British Columbia - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
+1 604 822 8490 (Phone)

HOME PAGE: http://www.janbena.com

Guangli Lu

University of British Columbia, Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
6045069229 (Phone)

HOME PAGE: http://sites.google.com/view/guanglilu

Iris Wang (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
9
Abstract Views
128
PlumX Metrics