Journal of Economic Behavior & Organization
Productivity; Top management pay; Relative pay; Transitional economy
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.
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).
Copyright © 2014 Elsevier B.V. All rights reserved.
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Accepted Author Manuscript
Firth, M., Leung, T. Y., Rui, O. M., & Na, C. (2015). Relative pay and its effects on firm efficiency in a transitional economy. Journal of Economic Behavior & Organization, 110, 59-77. doi: 10.1016/j.jebo.2014.12.001