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Is firm performance driven by fairness or tournaments? Evidence from Brazilian matched data

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  • Luiz A. Esteves
  • Pedro S. Martins

Abstract

Theory and evidence are ambiguous about the effect of within-firm wage inequality on firm performance. This paper tests empirically this relationship drawing on detailed Brazilian matched employer-employee panel data, considering alternative measures of inequality and performance and different estimation methods. We find overwhelming evidence of a positive relationship between wage dispersion and firm performance when using cross-section analysis, especially in manufacturing. However, this relationship is weakened when controlling for firm time-invariant heterogeneity.

Suggested Citation

  • Luiz A. Esteves & Pedro S. Martins, 2008. "Is firm performance driven by fairness or tournaments? Evidence from Brazilian matched data," Working Papers 16, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    • Handle: RePEc:cgs:wpaper:16
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    File URL: http://cgr.sbm.qmul.ac.uk/CGRWP16.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Tournaments; Incentives; Equity; Wage Dispersion;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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