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

Michael Firth; Tak Yan Leung; Oliver M. Rui; Chaohong Na

doi:10.1016/j.jebo.2014.12.001

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

Michael Firth
, Tak Yan Leung
, Oliver M. Rui
, Chaohong Na

Hong Kong Metropolitan University

Research output: Contribution to journal › Article › peer-review

38 Citations (Scopus)

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	https://doi.org/10.1016/j.jebo.2014.12.001
Publication status	Published - 1 Feb 2015

Keywords

Productivity
Relative pay
Top management pay
Transitional economy

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10.1016/j.jebo.2014.12.001

Cite this

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title = "Relative pay and its effects on firm efficiency in a transitional economy",

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.",

keywords = "Productivity, Relative pay, Top management pay, Transitional economy",

author = "Michael Firth and Leung, \{Tak Yan\} and Rui, \{Oliver M.\} and Chaohong Na",

note = "Funding Information: 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 ). Publisher Copyright: {\textcopyright} 2014 Elsevier B.V.",

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AU - Na, Chaohong

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PY - 2015/2/1

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N2 - 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.

AB - 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.

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KW - Top management pay

KW - Transitional economy

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DO - 10.1016/j.jebo.2014.12.001

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JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

ER -

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

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Keywords

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