Owner Culture and Pay Inequality within Firms

We study the impact of national culture on within-firm pay inequality using a unique administrative dataset covering closely-held immigrant-owned firms in Canada from 2001-2017. We show that within-firm pay inequality varies significantly with a firm owner’s country of origin. Firms owned by immigrants from more individualistic countries have higher pay inequality. Using a difference-in-differences analysis, we find a significant increase in within-firm pay inequality after the firm is taken over by immigrant owners from countries with higher within-firm-pay-inequality or more individualistic cultures. Our results suggest that informal institutions are important determinants of within-firm pay inequality across countries and thereby income inequality world-wide.

Keywords: national culture, pay inequality, individualism, immigration

JEL Classification: J31, J15, Z10

Suggested Citation: Suggested Citation

Wang, Iris and Bena, Jan and Lu, Guangli, Owner Culture and Pay Inequality within Firms (March 31, 2022). Available at SSRN: https://ssrn.com/abstract=4071250 or http://dx.doi.org/10.2139/ssrn.4071250