Internal wage dispersion and firm performance: white‐collar evidence

Abstract

Purpose

The purpose of this paper is to investigate the net relationship between internal wage dispersion and firm performance.

Design/methodology/approach

An empirical investigation of the relationship between internal wage dispersion and firm performance is performed using linked employer‐employee data for Norwegian firms from 1986 to 1997.

Findings

Contrary to findings in previous empirical work of a positive relationship between internal wage dispersion and firm performance, the analysis finds no such evidence in Norwegian firms, even though internal wage dispersion has increased.

Originality/value

The paper contributes to the relatively sparse empirical literature on internal wage dispersion and firm performance. Further, the analysis provides a new econometric specification for estimating internal wage dispersion that explicitly takes into account the hierarchical organization of firms. In contrast with previous work, the analysis also distinguishes between dispersion in both the fixed and variable portions of wages.

Citation

Hunnes, A. (2009), "Internal wage dispersion and firm performance: white‐collar evidence", International Journal of Manpower, Vol. 30 No. 8, pp. 776-796. https://doi.org/10.1108/01437720911004425