Dispersed or Skewed? An Expanded Conceptualization of Pay Dispersion and Firm-Level Implications

Abstract

This article extends prior research on the performance implications of horizontal pay dispersion. Prior research has shown mixed evidence about the influence of pay dispersion, and most studies have conceptualized and measured pay dispersion based on its variance and range. I expand the conceptualization of pay dispersion by suggesting pay skewness as a supplementary measure. I then hypothesize that the benefits of pay dispersion are magnified (and its drawbacks are mitigated) when the pay distribution is negatively skewed, and the drawbacks of pay dispersion are exacerbated (and its benefits are weakened) when the pay distribution is positively skewed. Longitudinal analyses of five-wave panel data yield general support for my expanded conceptualization of pay dispersion and my hypotheses.