Wage Comparisons In and Out of the Firm: Evidence from a Matched 
Employer–Employee French Database

Godechot, Olivier; Senik, Claudia

doi:10.1016/j.jebo.2015.07.003

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Wage Comparisons In and Out of the Firm: Evidence from a Matched Employer–Employee French Database

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Godechot, Olivier
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo), Max Planck Society;

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http://dx.doi.org/10.1016/j.jebo.2015.07.003
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Citation

Godechot, O., & Senik, C. (2015). Wage Comparisons In and Out of the Firm: Evidence from a Matched Employer–Employee French Database. Journal of Economic Behavior & Organization, (117), 395-410. doi:10.1016/j.jebo.2015.07.003.

Cite as: https://hdl.handle.net/11858/00-001M-0000-0029-A812-F

Abstract

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.