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Claudia Senik

Wage comparisons in and out of the firm

Evidence from amatched employer–employee French database

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Olivier Godechot, Claudia Senik. Wage comparisons in and out of the firm. Journal of Economic Behavior and Organization, 2015, 117 (117), pp.395 - 410. ⟨10.1016/j.jebo.2015.07.003⟩. ⟨halshs-01314331⟩
Olivier Godechot and Claudia Senik
Journal of Economic Behavior and Organization
2015

This paper looks at the association between wage satisfaction and other people’s pay, based on a matched employer–employee dataset. Three notions of reference wage appear to be being of particular importance: (i) the median wage level in one’s firm, (ii) the level of wage of similar workers in the region, and (iii) the top 1% wage in one’s firm. The first one triggers a signal effect, whereby all employees – especially young ones – whatever their relative position in the firm, are happier the higher the median wage in their firm, holding their own wage constant. The second and the third ones are sources of relative deprivation, i.e. workers’ satisfaction decreases with the gap between their own salary and these reference categories. These findings are based on objective measures of earnings as well as subjective declarations about wage satisfaction, awareness of other people’s pay and reported income comparisons.