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The Impact of Wage Dispersion on Labor Productivity: Evidence from Finnish workers

In: New Analyses of Worker Well-Being

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  • Laura Arranz-Aperte

Abstract

Using an extensive data set on Finnish workers during the years 1990–2002, we analyze the relation between dispersion of wages within plants and labor productivity. We find a positive and significant relation between dispersion of wages within plant and average sales per worker. This relation is quadratic when dispersion is conditioned on workers’ observable characteristics. We also find positive and significant relation between unconditional dispersion of wages within plant and value added per hours worked, while we find a non-significant relation between conditional wage dispersion and valued added per hours worked. Results indicate that the incentive effect of wage dispersion dominates fairness or sabotage considerations.

Suggested Citation

  • Laura Arranz-Aperte, 2014. "The Impact of Wage Dispersion on Labor Productivity: Evidence from Finnish workers," Research in Labor Economics, in: New Analyses of Worker Well-Being, volume 38, pages 77-103, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rleczz:s0147-9121(2013)0000038003
    DOI: 10.1108/S0147-9121(2013)0000038003
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    Cited by:

    1. Stoyanov Andrey & Zubanov Nick, 2022. "Skill complementarity in production technology: New empirical evidence and implications," German Economic Review, De Gruyter, vol. 23(2), pages 233-274, May.

    More about this item

    Keywords

    Fairness; tournaments; wage dispersion; labor productivity; M52; J31; L25;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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