%0 Report
        %A Barth, Erling
%A Bratsberg, Bernt
%A Haegeland, Torbjørn
%A Raaum, Oddbjørn
        %T Performance Pay and Within-Firm Wage Inequality
        %D 2009
        %8 2009 Apr
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 4137
        %U https://www.iza.org/index.php/publications/dp4137
        %X 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.
        %K wage inequality
%K performance related pay
%K union bargaining