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Vertical and Horizontal Wage Dispersion and Mobility Outcomes: Evidence from the Swedish Microdata

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  • Aleksandra Kacperczyk

    (London Business School, London NW1 4SA, United Kingdom)

  • Chanchal Balachandran

    (Institute for Analytical Sociology, Linköping University, S-60174 Norrköping, Sweden)

Abstract

Using employer–employee matched data from Sweden between 2001 and 2008, we test hypotheses designed to assess the contingent nature of the relationship between wage dispersion and cross-firm mobility. Whereas past research has mostly established that dispersed wages increase interfirm mobility, we investigate the conditions under which pay variance might have the opposite effect, serving to retain workers. We propose that the effect of wage dispersion is contingent on organizational rank and that it depends on whether wages are dispersed vertically (between job levels) or horizontally (within the same job level). We find that vertical wage dispersion suppresses cross-firm mobility because it is associated with outcomes beneficial for employees, such as attractive advancement opportunities. By contrast, horizontal wage dispersion increases cross-firm mobility because it is associated with outcomes harmful for employees, such as inequity concerns. We further find that the vertical-dispersion effect is amplified (mitigated) for bottom (top) different-level wage earners because bottom (top) wage earners have the most (least) to gain from climbing the job ladder. Similarly, the horizontal-dispersion effect is amplified (mitigated) for bottom (top) same-level wage earners because bottom (top) wage earners are most (least) subject to negative consequences of this dispersion. More broadly, this study contributes to our understanding of the relationship between wage dispersion and cross-firm mobility.

Suggested Citation

  • Aleksandra Kacperczyk & Chanchal Balachandran, 2018. "Vertical and Horizontal Wage Dispersion and Mobility Outcomes: Evidence from the Swedish Microdata," Organization Science, INFORMS, vol. 29(1), pages 17-38, February.
    • Handle: RePEc:inm:ororsc:v:29:y:2018:i:1:p:17-38
    DOI: 10.1287/orsc.2017.1169
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    6. Hailiang Zou & Yunfeng Lu & Guoyou Qi, 2023. "Does Pay Disparity within Top Management Teams Lead to Bribery Activity? The Moderation of Demographic Diversity," Sustainability, MDPI, vol. 15(4), pages 1-23, February.
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