Owner Culture and Pay Inequality within Firms
66 Pages Posted: 8 Apr 2022 Last revised: 1 May 2023
Date Written: March 31, 2022
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