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How Does the Position in Business Group Hierarchies Affect Workers’ Wages?

Author

Listed:
  • Hartmut Egger
  • Elke Jahn
  • Stefan Kornitzky
Abstract
We merge firm-level data on ownership linkages with administrative data on German workers to analyze how the position in a business group hierarchy affects workers’ wages. To acknowledge that ownership linkages are not onedirectional, we propose an index of hierarchical distance to the ultimate owner that accounts for the complex network structure of business groups. After controlling for unobserved heterogeneity, we find a positive effect of larger hierarchical distance to the ultimate owner of a business group on workers’ wages. To explain this finding, we develop a monitoring-based theory of business groups. Our model predicts higher wages to prevent shirking by workers if a larger hierarchical distance to the ultimate owner is associated with lower monitoring efficiency.

Suggested Citation

  • Hartmut Egger & Elke Jahn & Stefan Kornitzky, 2021. "How Does the Position in Business Group Hierarchies Affect Workers’ Wages?," Working Papers 213, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:213_eggerjahnkornitzky
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Business groups; ownership networks; workers wages; differencein-difference; hierarchical distance;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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