TY  - RPRT
        AU  - Barth, Erling
AU  - Bratsberg, Bernt
AU  - Haegeland, Torbjørn
AU  - Raaum, Oddbjørn
        TI  - Performance Pay and Within-Firm Wage Inequality
        PY  - 2009/Apr/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 4137
        UR  - https://www.iza.org/index.php/publications/dp4137
        AB  - 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.
        KW  - wage inequality
KW  - performance related pay
KW  - union bargaining
        ER  -