Intra-Firm Wage Dispersion and Firm Performance: Evidence from Linked Employer-Employee Data

26 Pages Posted: 28 Dec 2004

See all articles by Thierry Lallemand

Thierry Lallemand

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA)

Robert Plasman

University of Brussels -Department of Applied Economics

Francois Rycx

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA); IZA Institute of Labor Economics

Abstract

This paper examines the relationship between intra-firm wage dispersion and firm performance in large Belgian firms using a unique matched employer-employee data set. On the basis of the Winter-Ebmer and Zweimuller's (1999) methodology, we find a positive and significant relationship between intra-firm wage dispersion and profits per capita, even when controlling for individual and firm characteristics and addressing potential simultaneity problems. Results also suggest that the intensity of this relationship is stronger for blue-collar workers and within firms with a high degree of monitoring. These findings are more in line with the 'tournament' models than with the 'fairness, morale and cohesiveness' models.

Suggested Citation

Lallemand, Thierry and Plasman, Robert and Rycx, François, Intra-Firm Wage Dispersion and Firm Performance: Evidence from Linked Employer-Employee Data. Kyklos, Vol. 57, No. 4, pp. 533-558, November 2004. Available at SSRN: https://ssrn.com/abstract=636865

Thierry Lallemand (Contact Author)

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA) ( email )

Ave. Franklin D Roosevelt, 50
Brussels, B-1050
Belgium

Robert Plasman

University of Brussels -Department of Applied Economics ( email )

Ave. Franklin D Roosevelt, 50
Brussels, B-1050
Belgium

François Rycx

Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA) ( email )

Ave. Franklin D Roosevelt, 50
Brussels, B-1050
Belgium
+32 0 2 6504110 (Phone)
+32 0 2 6503825 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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