@TechReport{iza:izadps:dp4137,
            	author={Barth, Erling and Bratsberg, Bernt and Haegeland, Torbjørn and Raaum, Oddbjørn},
            	title={Performance Pay and Within-Firm Wage Inequality},
            	year={2009},
	month={Apr},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={4137},
            	url={https://www.iza.org/index.php/publications/dp4137},
	abstract={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 output 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 individual employee pay 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.},
	keywords={wage inequality;performance related pay;union bargaining},
            }