revised version published in: Industrial and Labor Relations Review, 2008, 61 (4), 485-501
In this contribution we examine the interrelation between intra-firm wage increases and firm
performance. Previous studies have focused on the dispersion of wages in order to examine
for the empirical dominance of positive monetary incentives effects compared to adverse
effects due to fairness considerations. We argue that the dispersion of wage increases rather
than wage levels is a crucial measure for monetary incentives in firms. The larger the
dispersion of wage increases the higher the amount of monetary incentives in firms. In
contrast, huge wage inequality without any promotion possibilities does not induce any
monetary incentives. Evidence from unique Danish linked employer employee data shows
that large dispersion of wage growth within firms is generally connected with low firm
performance. The results are mainly driven by white collar rather than blue collar workers.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.