Abstract
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 language | English |
|---|---|
| Pages (from-to) | 59-77 |
| Number of pages | 19 |
| Journal | Journal of Economic Behavior and Organization |
| Volume | 110 |
| DOIs | |
| Publication status | Published - 1 Feb 2015 |
Funding
We thank the reviewers and editor, William Neilson, for helpful comments and suggestions on an earlier version of the paper. We also thank Sibo Liu for helpful advice. Michael Firth acknowledges financial support from the Government of the HKSAR (LU 390113). Oliver Rui acknowledges financial support of a CEIBS research grant and a National Science Fund Committee of China (No. 71372203).
Keywords
- Productivity; Top management pay; Relative pay; Transitional economy