Within-Firm Pay Inequality and Productivity

Thu, 01 Jan 2026 00:00:00 +0000

This paper investigates how within-firm pay inequality relates to firm-level labor productivity, using a novel linkage of three confidential U.S. Census Bureau datasets covering millions of workers at hundreds of thousands of firms from 2003 to 2015.

The motivating puzzle is that the dramatic rise in U.S. wage inequality since the 1970s is well documented, but the firm-side determinants of within-firm pay dispersion have been difficult to study due to the absence of comprehensive matched employer-employee data in the United States. The paper asks whether firms’ own productivity levels can explain the structure of pay inequality within firms, and whether rising aggregate productivity can account for the secular increase in the CEO-to-median-worker pay gap.

Melanie Wallskog | Macro Paper Warehouse

Within-Firm Pay Inequality and Productivity