Within-Firm Wage Inequality and Corporate Innovation: Evidence from China's Listed Firms

摘要

Within-firm wage inequality, which individuals face daily, has largely been neglected by the literature on wage inequality. However, it may affect an individual's incentive to work, resulting in an overall impact on a firm's operation. This study discusses the effects of within-firm wage inequality on corporate innovation. Using data from Chinese firms listed over the period 2000-2015, we found that (1) within-firm wage inequality promotes innovation, (2) the use of two instrumental variables for our analysis confirms that the chain of causality goes from inequality to innovation, and (3) possible mechanisms are incentivizing managers to increase R&D inputs and using bank loans to finance innovation.