Flexible Wages Systems and the Structure of Wages: Evidence from Matched Employer-Employee Data

A growing theoretical and empirical literature is concerned with the effects of flexible workplace systems or High Performance Work Organizations (HPWOs) on wages. Existing theoretical literature suggests that these forms of organization should lead to higher inequality across firms, increased segregation of labour markets and decreased within-firm inequality. This Paper makes use of a new employer-employee-linked data set for Germany to examine the labour market effects of flexible workplace systems. Our results suggest that HPWOs increase both across and within firm inequality. We do not find evidence, however, that HPWOs affect their employment structure.