Organization & density-related differences in within-firm wage disparities

Abstract

This paper examines differences in within-firm wage disparities across French employment areas. Using administrative data, my analysis first documents that wage disparities are larger within firms operating in denser employment areas: a 100% increase in the employment density of an area is associated with a 0.015 log point increase in the 95/5 hourly wage ratio within firms. My analysis also examines the extent to which differences in the internal organization of labor into layers of hierarchy account for these disparities. I find that firms in denser employment areas organize into a greater number of layers, and that wage disparities are larger in firms with more layers. Finally, I conclude that firm organization is important: local differences in firm organization account for 31.3%–50.0% of the cross-sectional relationship between the employment density of areas and the log of the 95/5 hourly wage ratio within firms, and 12.2% of the same relationship estimated within firms. A separate analysis conducted with the standard deviation of log hourly wages leads to similar conclusions.