Relative pay and its effects on firm efficiency in a transitional economy

Michael Arthur FIRTH, Tak Yan LEUNG, Oliver M. RUI, Chaohong NA

Research output: Journal PublicationsJournal Article (refereed)peer-review

21 Citations (Scopus)


In this study, we examine the impact of relative pay (manager pay divided by average worker pay) on a firm's productivity. Using data from a major transitional economy, China, we find that relative pay is negatively associated with high productivity. Our results provide support for the view that workers are alienated when their incomes are far lower than that of top management and this leads to lower productivity. This effect is most pronounced in labor intensive firms.
Original languageEnglish
Pages (from-to)59-77
Number of pages19
JournalJournal of Economic Behavior and Organization
Publication statusPublished - 1 Feb 2015


  • Productivity; Top management pay; Relative pay; Transitional economy

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