European Business Schools Librarian's Group
Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics
No 01-2: Pay Spread and Skewness, Employee Effort and Firm Productivity
Paul Bingley () and Tor Eriksson ()
Additional contact information
Paul Bingley: National Center for Register-based Research, Postal: University of Aarhus, Tåsingegade 1, 8000 Aarhus C, Denmark
Tor Eriksson: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Abstract: We test predictions from theories of tournament, fairness and tastes for skewness
about the effects of pay spread and skewness on employee effort and firm
productivity. The data come from the population of 6,501 medium-to-large sized
Danish private sector firms matched with all their employees during 1992-95.
Potential simultaneity problems are addressed by instrumental variables provided by
institutional variation in the income tax system. Differences in firm productivity
effects between occupational groups and types of firms give support to the theories of
fairness, tournaments and tastes for skewness. Only individual effort effects support
tournament theory alone.
Keywords: Tournaments; Fairness; Skewness; Pay distribution; Matched employeremployee data
25 pages, January 1, 2001
Full text files
01-2_te.pdf
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