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TitleEntry deregulation, firm organization, and wage inequality
Author(s)Cooke, Dudley
Fernandes, Ana P.
Ferreira, Priscila
KeywordsFirm entry deregulation
Hierarchy layers
Internal organization
Product market competition
Span of control
Wage inequality
Issue dateJun-2021
JournalInternational Journal of Industrial Organization
CitationCooke, D., Fernandes, A. P., & Ferreira, P. (2021). Entry deregulation, firm organization, and wage inequality. International Journal of Industrial Organization, 77, 102763. doi:
Abstract(s)This paper identifies a causal link between changes in product market competition, firm reorganization and within-firm wage inequality. We exploit a unique episode of comprehensive firm entry deregulation as a quasi-natural experiment and use exceptionally detailed linked employer-employee data for the universe of private sector firms and workers in Portugal. Following deregulation affected firms flatten their hierarchies: the number of layers is reduced and managers’ span of control increased. Dropping a hierarchy layer is accompanied by a significant reduction in wage inequality within the firm, by 8% for the average pay ratio between the top and the bottom layer and 4.4% for the 90-50 percentile wage ratio, showing that there are real changes arising from firm reorganization. Overall wage dispersion, measured by the standard deviation of hourly pay, is also reduced. We discuss mechanisms and interpretations for these changes.
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AccessRestricted access (UMinho)
Appears in Collections:NIPE - Artigos em Revistas de Circulação Internacional com Arbitragem Científica

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