English, Article, Journal or magazine article edition: Performance Pay and Within-Firm Wage Inequality Erling Barth; Bernt Bratsberg; Torbjørn Hægeland and Oddbjørn Raaum

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Bookmark: http://trove.nla.gov.au/version/53846
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Performance Pay and Within-Firm Wage Inequality
Author
  • Erling Barth
  • Bernt Bratsberg
  • Torbjørn Hægeland and Oddbjørn Raaum
Physical Description
  • preprint
Notes
  • This paper examines the impact of performance-related pay on wage differentials within firms. Our theoretical framework predicts that, compared to a fixed pay system, pay schemes based on individual effort increase within-firm wage inequality, while group-based bonuses have minor effects on wage dispersion. Theory also predicts an interaction between performance-related pay and union bargaining, where union power reduces the impact of performance pay on wage dispersion. The empirical contribution utilizes two recent Norwegian employer surveys, linked to a full set of employee records. A longitudinal sub-sample allows for identification based on fixed establishment effects. Introduction of performance-related pay is shown to raise residual wage inequality in nonunion firms, but not in firms with high union density. Our findings suggest that even though performance-related pay appears to be on the rise, the overall impact on wage dispersion is likely to be small, particularly in European countries with strong unions.
  • Performance related pay; wage inequality; union bargaining
  • RePEc:ssb:dispap:535
Language
  • English
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